For Juul Labs, the troubled king of vaping, the blows keep coming — even from Marlboro country.

Marlboro cigarette maker Altria Group, which poured nearly $13 billion into the vaping startup in late 2018, valuing it at $38 billion, on Thursday said it had marked down its investment for a second time by $4.1 billion. That leaves the value of its 35% stake at just $4.2 billion — or about a third of its initial worth.

Altria also narrowed the terms of its cooperation with Juul, saying it would no longer give it marketing help and, instead, would focus solely on helping Juul steer through its growing regulatory challenges. Critically, Juul can only keep selling its products in the United States if it submits an application to the Food and Drug Administration (FDA) by May 12 — and if the agency eventually approves it. That process is what Altria and Juul will throw their remaining partnership behind.

Juul is facing a growing number of lawsuits from state attorneys general, school districts and parents blaming the company’s popular vaporizers for hooking teens on nicotine. It has removed some of its best-selling products from the market as U.S. regulators have sought tough new curbs on flavored vaping products. And younger users who once made Juul’s products a hit are being drawn to competing devices, such as disposable flavored vaping pens.

Winning FDA approval already was crucial for Juul, but the widening public blowback against vaping amid a rash of lung illnesses and the financial pressure created by Altria’s markdowns elevate the stakes. Altria said Thursday that if regulators bar Juul from the market for at least a year, the tobacco giant will be free to sell its own competing products.

“As we continue to reset the vapor category, we are committed to advancing the long-term potential for harm reduction for adult smokers while combating underage use,” Juul CEO K.C. Crosthwaite, a former Altria executive, said.


He said he was focused on building the company for the long term by preparing premarket tobacco-product applications to earn authorization in the United States. Juul’s latest internal valuation has put the company’s value at about $20 billion, according to an internal memo sent to staff and described to Bloomberg News.

Altria said it recorded $8.6 billion in charges to its Juul investment last year, mainly from legal claims against the vaping company, bringing the stake’s value to $4.2 billion as of Dec. 31.

The writedown is another blow to Altria’s efforts to broaden its portfolio beyond cigarettes. It’s also banking on growth from IQOS, the heat-not-burn device it sells in the United States, as part of a deal with Philip Morris International, which sells it in dozens of countries overseas. IQOS is now sold in the Atlanta and Richmond, Virginia, markets.

Altria’s core business in cigarettes remained strong, and the company will invest further in heated tobacco and oral products, CEO Howard Willard said on a call discussing its latest earnings. He was pleased with the progress of Cronos, the cannabis company in which it also owns a stake.

The Juul writedown is “a prelude to a pivot to prioritizing other noncombustible products,” such as the IQOS device, Bloomberg Intelligence analyst Kenneth Shea said in a note. Such a massive impairment charge “may raise concerns about CEO Howard Willard’s stewardship,” he said.

Altria has been “highly disappointed” in its Juul investment, Willard said. When Altria first made its investment, “Juul was the market-share leader and market-growth leader,” he said.


Altria expects that the legal claims against Juul will continue, after increasing by more than 80% since Oct. 31. Many name Altria as a co-defendant. CFO Billy Gifford said on the call that Altria would seek to dismiss lawsuits where it is named with Juul.

The company’s regulatory filings showed that Altria and Juul agreed not to pursue litigation against each other for a year after their agreement, and that in cases where both are co-defendants, Altria is limited from seeking reimbursements from Juul.

Altria made a number of other revisions to the pair’s cooperation. Juul will restructure its board once it gets antitrust clearance. It will include two directors designated by Altria, three independent directors, the Juul CEO and three directors designated by Juul stockholders other than Altria. The board also will add a nominating committee and a litigation oversight committee upon approval, according to Altria’s news release.

Altria is waiting for antitrust clearance from the U.S. Federal Trade Commission, which had been expected to let shares convert by Jan. 8. Willard said today the delay was not a concern.

Under the other revised terms of the cooperation accord, Altria’s noncompete option would be void if Juul can’t sell its products in the United States for at least a year, or if the value falls to less than 10% of its initial $12.8 billion investment.

“There’s always a chance something like that could happen,” Willard said. Still, he told investors not to read too much into its new agreement with Juul and called the deal one that “added value for both sides.”