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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

Trump voices support for Saturday's pro-Capitol riots rally

Photo: Tayfun Coskun/Anadolu Agency via Getty Images

Former President Trump on Thursday expressed solidarity with people facing prosecution in connection to the Capitol insurrection.

Why it matters: The statement was issued ahead of Saturday's rally to protest the treatment of Capitol rioters. Over 600 known federal defendants face charges related to the Jan. 6 insurrection.

Clinton-linked lawyer indicted in investigation of FBI's Russia probe

Photo: Eric Baradat/AFP via Getty Images

A grand jury has returned an indictment against Michael Sussmann, a lawyer whose firm represented the 2016 Clinton campaign, for lying to the FBI about not representing "any client" when he presented them with allegations about a secret Trump Organization back-channel to a Russian bank.

Why it matters: It's the second criminal charge stemming from special counsel John Durham's review of possible misconduct by the intelligence community and prosecutors who investigated the 2016 Trump campaign's ties to Russia.

Federal judge blocks Biden administration's use of Title 42 policy

Photo: Stefani Reynolds/Bloomberg via Getty Images

A federal judge on Thursday blocked the Biden administration from enforcing a public health order that fast-tracked deportations of migrant families at the southern border.

Why it matters: President Biden has faced significant backlash for retaining the Trump-era policy, which was implemented as a COVID containment measure. The expulsions deny adult migrants and families the chance for asylum.

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