The SEC Subpoenas Altria over their investment in E-cigarette maker Juul


Last year, Altria bought a stake in e-cigarette maker Juul for $12.8 billion, but it hasn't gone as expected since.

The SEC regulators initiated an inquiry related to Altria’s investment in the now controversial e-cigarette company Juul Labs. Altria is under scrutiny by the SEC concerning whether they appropriately and satisfactorily disclosed to shareholders the risks of the investment after it paid $12.8 billion for a 35% equity stake in Juul.

So far the traditional tobacco company has written off about $8.6 billion in charges associated with this investment in nontraditional tobacco alternatives. Juul and Altria were issued subpoenas by the SEC. Juul has turned over documents including communications with Altria.

Altria’s investment originally valued Juul at $38 billion. Though the e-cigarette producer has been punished by lawsuits, regulatory problems, and has been under investigation that Juul was marketing its merchandise to minors. They took the blame for the wave of new underage vapers and now have pulled their most popular flavors from the U.S. and international markets.

Altria’s CEO Howard Willard stated that he was “highly disappointed in the performance of our Juul investment.” He mentioned vaping-related lung ailment as one of the shocks from the investment. Those stories of teenagers with wrecked lungs due to vaping are what provoked U.S. health officials to warn consumers not to use e-cigarettes before it was discovered if the illnesses were linked to vaping e-cigarettes or other types of vaping products.

Mr. Willard said Altria had recently revised its agreement with Juul and the new deal had the full support of Altria’s board. The revised agreement says that Altria will cease marketing and retail distribution concerning Juul. Altria will assist Juul with the submission of its products for authorization by the Food and Drug Administration to remain on sale in the U.S. The deal will also allow Altria to manufacture and sell their own e-cigarettes if Juul is banned by the federal government from selling the product in the U.S. for at least a year or if the value of Altria’s investment in Juul falls to $1.28 billion or less.

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Economics, Finance and Investing