The Strategist

Marlboro manufacturer lowers Juul evaluation by more than three times

01/31/2020 - 08:00

Cigarette maker Marlboro has written off more than $ 4 billion of its investment in Juul e-cigarette company. The value of Juul, which was one of the most expensive startups in Silicon Valley just a year ago, fell by more than three times.

Tobacco giant Altria, which also produces cigarettes under the Marlboro brand, said that it wrote off $ 4.1 billion of its investments in electronic cigarette manufacturer Juul Labs in the fourth quarter of 2019.

In December 2018, Altria invested $ 12.8 billion in Juul, gaining 35% of the company. The entire business of Juul was then valued at $ 38 billion, which made it one of the most expensive startups in Silicon Valley at that time, Forbes USA notes. Now the investor said that it estimates its stake in Juul Labs at $ 4.2 billion. Thus, the entire company is now valued at $ 12 billion.

In the year that has passed since the transaction was concluded, Altria has written off its investments in Juul twice. For the first time this happened in the third quarter of 2019, when Altria wrote off $ 4.5 billion. The write-off of investments can mainly be explained by the increase in the number of lawsuits threatening Juul and the expectation that their number will only grow, Altria reported.

“I am extremely disappointed with the financial performance of the investment in Juul,” Altria’s CEO Howard Willard told Reuters. He noted that the startup’s assessment was “significantly lower” than the one expected by the company. An analyst at CFRA Research said that such an investment is a stain on the company’s reputation and a “big strategic mistake”.

Concluding a deal with Juul, Atria planned to enter the vape market in the face of a decline in the number of smokers and cigarette sales in the United States, Reuters writes. However, a series of deaths associated with smoking vapes and restrictions on the sale of devices hit the business of Juul and its competitors. Under the new agreement, Altria will cease providing Juul with logistics, distribution, and access to retailer shelves.