Altria’s Juul stake goes up in smoke: from $12.8 bln to $450 mln

Marlboro maker Altria Group Inc (MO.N) on Thursday further slashed the value of its stake in Juul Labs Inc to just $450 million, blaming a decrease in the chances of the U.S. health regulator approving Juul’s e-cigarettes.

The value of Altria’s 35% stake had slipped to $1.6 billion at the end of March from $12.8 billion in 2018 amid intense regulatory scrutiny and increased risks of a complete ban in the United States.

Altria said there is higher probability of Juul seeking bankruptcy protection as its cash reserves dry up.

Juul’s e-cigarettes were briefly banned in the United States last month after the Food and Drug Administration concluded that it failed to show the sale of its products will be appropriate for public health.

But following an appeal by the company, the health regulator put the ban on hold and agreed to an additional review of Juul’s marketing application.

Juul has maintained that its products meet the statutory standard of being appropriate for the protection of public health.

Altria’s stake in Juul is now worth just 3.5% of the original value, giving the tobacco giant the option to be released from it non-compete clause and invest or engage in the e-vapor business other than Juul.

However, Altria said it had opted not to be released from those obligations for now, as it still sees value in its investment rights, including substantial voting power, in Juul.

Altria also said high inflation and gas prices as well as rising interest rates were denting cigarette demand in the United States, contributing to a 5.7% drop in its second-quarter revenue to $6.54 billion.