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Altria Veterans Are Taking Key Spots at Juul

Another former executive from Altria Group will be working for Juul Labs. The question for investors is whether that is positive for stock in the big tobacco company, or negative.

The back story. Altria invested in Juul in December 2018, taking a 35% stake in the vaping firm to broaden its portfolio beyond traditional cigarettes. Plenty of analysts were skeptical of the deal. More doubts are being raised as concerns about a possible link between vaping and serious health problems have hit the headlines, and the fallout included the departure of Juul’s CEO.

What’s new. On Wednesday, Juul said that Joe Murillo, Altria’s previous head of regulatory affairs, would become the company’s new chief regulatory officer. As The Wall Street Journal reports, his expertise will come in handy, as Murillo will “shepherd the applications that Juul must submit by May to the Food and Drug Administration for any products it wants to keep on the market beyond that point,” as the government considers bans on vaping products.

He will be working with his former Altria colleague, K.C. Crosthwaite, who took over as CEO last week.

Looking ahead. It’s just shy of 10 months since Altria took a stake in Juul, the leading vaping startup, and the market has never truly taken to the move. At the start, naysayers were concerned about the price Altria paid, as well as whether vaping products would eat into demand for cigarettes, and how much influence the tobacco company would have at Juul. Illnesses and deaths that may have been a result of vaping have caused more concern, especially on the regulatory front.

Some analysts had argued that Altria would have to commit to being a wholly passive investor in Juul had it been able to merge with Philip Morris International (PM), given the latter’s own heat-not-burn device iQOS.  Yet those talks fell apart—some feel because of the increased regulatory risk Altria faces via Juul.

With two Altria veterans now in key positions at Juul, investors may be comforted that their expertise will help the vaping company navigate the fallout from recent headlines. Yet their presence may also serve as a reminder of Altria’s ongoing ties to the firm for those inclined to view Juul as a liability rather than an asset.

Altria was down 1.4% to $40.58 in morning trading, while the S&P 500 was off 1.8%.

Teresa Rivas/Barron’s