Jan 30, 2020

Altria's Juul investment goes up in smoke

Illustration: Lazaro Gamio/Axios

Altria's decision to pay $12.8 billion last year for a 35% equity stake in vaping giant Juul is turning into one of the worst strategic investments in memory.

Driving the news: Altria on Thursday took a $4.1 billion impairment charge on its Juul investment, mostly blaming the "increased number of legal cases pending against Juul," which it says have increased more than 80% since last November 2019.

  • Add in an an earlier impairment charge, and Altria now values its Juul stake at $4.2 billion — representing a loss of 67%, or $8.6 billion, in just 14 months.

The big picture: Altria and Juul also amended certain non-financial parts of their agreement, including giving Altria an option to exit a non-compete agreement if Juul either gets banned from selling e-vaping products in the U.S. for a year, or if Altria writes down the carrying value of its investment to 10% of the original $12.8 billion price.

  • And, just for one last kick in the teeth, the CEO of Philip Morris said on CNBC that the idea of a reconsolidation with Altria "is finished."

Between the lines: If there's any silver lining here for Juul, it's that Altria did also maintain its commitment "to work together" on pre-market tobacco product applications (PMTAs), and to continue giving it regulatory affairs support.

What they're saying:

"As we continue to reset the vapor category, we are committed to advancing the long-term potential for harm reduction for adult smokers while combatting underage use. We are focused on building a company for the long-term by preparing high-quality, scientifically rigorous Premarket Tobacco Product Applications to earn authorization in the U.S. while we take a methodical approach to our overseas presence."
— Statement from Juul CEO K.C. Crosthwaite

The bottom line: Altria thought its deal for Juul would lift all nicotine-stained boats, kicking off an industry consolidation that would protect all players from changing consumer and retailer tastes. Instead, it might have just blown a $12.8 billion hole in the hull.

Go deeper: FDA issues ban on fruit and mint-flavored vape cartridges

Go deeper

Juul bought ads on Cartoon Network and youth sites, lawsuit claims

Massachusetts Attorney General Maura Healey. Photo John Blanding/The Boston Globe via Getty Images

Juul Labs paid a company to place ads on student-focused websites including the Cartoon Network, Nickelodeon and Seventeen magazine, according to a lawsuit filed Wednesday by Massachusetts Attorney General Maura Healey.

Why it matters: The suit, based on the findings of a two-year investigation, contradicts the e-cigarette company’s denial that it sought out teenagers to buy its products.

Go deeperArrowUpdated Feb 12, 2020 - Health

Tobacco marketing works

Exposure to vaping products — through friends, endorsements on social media or branded merchandise — makes students much more likely to vape, according to a study published in JAMA on Wednesday.

Driving the news: The study was published the same day Massachusetts Attorney General Maura Healey sued Juul, saying its early marketing campaign targeted teenagers with celebrity endorsements and ads on popular sites.

Go deeperArrowFeb 13, 2020 - Health

The average NBA team is now worth $2.1 billion

Reproduced from Forbes; Chart: Axios Visuals

The average NBA franchise is now valued at $2.12 billion, per Forbes — a figure that has grown 476% in the past decade.

Why it matters: Thanks to the NBA's international growth and the $24 billion TV deal it signed with ESPN and Turner in 2014, team values have grown at a much faster rate than the other three major U.S. sports leagues.

Go deeperArrowFeb 12, 2020 - Sports