Altria — the Big Tobacco company — just had its worst year ever get even worse
Smoked out... Altria, the tobacco-giant behind Marlboro cigarettes, just lost an extra $4.1B on its investment in e-cig phenom Juul. When Altria first invested in Juul, the startup was worth $38B — Now Juul's value has dropped 68% to around $12B. Boom. Up in smoke.
- Threat: As smokers traded tobacco-filled paper for a liquid-filled metal Juul, the leading vape brand became a big threat to Altria. So...
- Investment: Altria invested $12.8B in Juul in Dec 2018 for a 35% stake in the company. It thought it made a solid strategic investment in the future of smoking. Until...
- Problems: Altria's got 99 of them, all called "Juul." A torrent of regulations and litigation — mostly because young kids got hooked on Juul's creme-flavored vapes — have cost it big.
Major fail... Back in October, Altria wrote down its Juul stake by $4.5B. With this latest drop, Altria's lost $8.6B from its Juul investment in just over a year. For a company whose cigarette biz was already hurt, this one hurts more.
A "strategic" investment... becomes a major liability. That's the problem with investing in a new industry that's not very regulated — regulation will come. For Juul, this happened in a big way. While the company says it's meant as a safer alternative for smokers, people who never smoked before started. Regulators blamed Juul's charmingly colorful marketing and Jamba Juice-inspired flavors. Now Altria's paying the price, too.