Altria Group Inc MO.N on Friday took a third-quarter hit of $2.6 billion to its investment in Juul Labs Inc, further diminishing the value of its initial $12.8 billion stake in the e-cigarette maker that is facing increased regulatory scrutiny.
Its stake in Juul is now worth $1.6 billion, the company said, implying that the value of the vaping products maker was a fraction of the $38 billion it was worth when the cigarette company picked up a 35% stake in December 2018.
Altria has so far taken $11.2 billion in write-downs as Juul’s valuation nosedived when regulators stepped up pressure following a rise in teenage vaping and a ban on the sale of popular flavors.
Juul, which recently decided to quit certain markets, had cut its valuation to about $10 billion from $12 billion at the end of last year.
However, Altria’s valuation of its stake implied it values Juul at about $4.6 billion, less than half of Juul’s own valuation.
Altria said on Friday it considered Juul’s international prospects and current U.S. e-vapor category dynamics in its valuation analysis.
“The e-vapor category will continue to undergo a transition period over the next few years as FDA makes market determinations on the thousands of PMTAs (Premarket Tobacco Product Application),” Chief Executive Officer Billy Gifford told analysts.
The U.S. Food and Drug Administration has moved Juul’s PMTA into scientific review, Altria said. The health regulator had said bit.ly/34EUBa6 in September it may notify e-cigarette makers if their products have deficiencies or else take a positive or negative decision.
Shares of Altria, down about 27% so far this year, fell about 2%. The company reported better-than-expected quarterly results and narrowed its 2020 adjusted diluted profit per share forecast range.