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As Prospects Dim, Juul Slashes $7 Billion From Valuation

With the prospects for global growth rapidly diminishing, electronic cigarette maker Juul Labs slashed its internal valuation by $7 billion, eliminating some 35% from the total and bringing it closer to the value assigned to it by its biggest investor, Altria (NYSE:MO).

The e-cig manufacturer is pulling out of South Korea, and may also leave the markets in Austria, Belgium, France, Portugal, and Spain, moves that are forcing it to cut another 900 jobs on top of the 650 positions it eliminated last year.

Up in smoke

It’s a major reversal for Juul Labs, and its tobacco giant partner too, as not too long ago the smoking-alternative leader saw significant expansion opportunities worldwide.

However, its prospects have been greatly undermined by escalating recriminations from regulators over rising teen use of e-cigs and the outbreak of a sometimes fatal lung illness that was ultimately linked to users vaping illicit THC compounds purchased online.

Altria, after taking a $12.8 billion stake in Juul in 2018, has since written off three-quarters of the value of the investment. Where the cigarette maker pegs Juul’s value at around $12 billion, the new assessment by the e-cig maker itself reduced its own value to $13 billion from the $20 billion value it assigned itself in January.

The hurdles confronting Juul are significant, not least of which is winning regulatory approval for its device from the FDA. The agency’s former commissioner has gone on record as saying he does not see how it would be possible.

Juul and Altria are under investigation by several agencies, and the FTC wants them to unwind their deal.

Rich Duprey/The Motley Fool