In December, tobacco giant Altria invested $12.8B into Juul, in hopes of diversifying its revenue stream with healthier smoking alternatives.
Altria acquired Juul when the company was growing at 800%, for a 36x sales multiplier, and the investment has opened up a whole carton of cigarettes.
Now the FDA is p*ssed, Altria’s stock continues to slide since the partnership, and Seeking Alpha reports that its 35% stake in Juul could see a massive write-off.
Nobody makes a mockery of the FDA
When the FDA reduced its original push to ban all flavored e-cigs down to nicotine-flavored vape-juice and menthol-flavored tobacco in November, Altria and Juul publicly pledged that they would work harder to keep cigs and e-cigs away from children.
So, when the FDA found out that the 2 companies had secretly structured a financial partnership that seems to do the opposite, the commission was a little miffed.
FDA Commissioner Dr. Scott Gottlieb accused the company of backtracking on its promise, and now the FDA is ready to take extreme measures, even if that means an all-out war on vapes.
The stats have both companies dead in the water
E-cig use rose 78% among high school students and 48% among middle schoolers from 2017 to 2018 — about 1.5m more students than the previous year.
The FDA is gunning for Juul, and that makes it a risky asset; even the smallest regulatory setback could depreciate the value of Altria’s investment in a big way.