ICYMI: Altria is beginning to look like tobacco’s bad bank after the Marlboro-maker’s value fell by around $7 billion over a U.S. crackdown on nicotine and e-cigarette partner Juul, writes JMAGuilford.
e-cigarettes made by Altria’s partner Juul, for which the Marlboro maker paid $12.8 billion for a 35% stake in 2018.
Juul had problems aplenty, but investors were still ascribing it some option value. Altria itself had written its investment down to $1.6 billion as regulatory setbacks and negative publicity over teen vaping and lung damage piled up. Yet the fall in the company’s value on Wednesday, more than four times that amount, suggests embers of optimism still smoldered.Altria now has a strategic problem. Juul was its best bet for diversifying away from U.S. cigarettes.
If there’s anything positive that comes out of this, it’s that Altria could escape from an agreement it had with Juul not to enter the vaping market on its own. If Altria writes down its investment in Juul by 90% - and as of , the writedowns stood at 87.5% - the non-compete becomes void. Altria’s smokeless ambitions may still rise from the ashes, in some form at least.
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