The attorneys general of 39 states have launched an investigation of the risks associated with e-cigarette (vaping) products made by Juul Labs and how the products were promoted to children. According to a press release from the office of Texas Attorney General Ken Paxton, the multistate investigation focuses on Juul’s marketing and sales practices.
Paxton commented:
I am pleased to be working alongside other states to determine whether any of JUUL’s statements or business practices mislead or otherwise harmed consumers. Protecting Texans from deceptive business practices is a high priority for my office, and I am committed to holding companies accountable for the quality, effects, and marketing of their products.
Nevada Attorney General Aaron Ford, who has joined the investigation, added:
The 39-state coalition is investigating Juul’s marketing and sales practices, including targeting of youth, claims regarding nicotine content, and statements regarding risks, safety and effectiveness as a smoking-cessation device.
The announcement noted that the U.S. Food and Drug Administration (FDA) estimated that more than 5 million U.S. middle and high school students used e-cigarettes last year and that nearly 1 million used the devices daily.
In January, cigarette maker Altria Inc. (NYSE: MO) took a fourth-quarter pretax, non-cash impairment charge of $4.1 billion related to its $12.8 billion investment for a 35% stake in Juul. In the third quarter, the company wrote down $4.5 billion related to the investment. The total $8.6 billion impairment leaves Altria with a value of just $4.2 billion in Juul.
On the company’s conference call following its fourth-quarter report, Chief Financial Officer Billy Gifford said the $4.1 billion write-down was related to Juul’s legal difficulties and the threat of regulatory restraint hobbling the e-cigarette market.
Juul and other makers of vaping devices, including Altria, have until May 12 to submit applications to the FDA for approval to sell flavored vaping pods to consumers. Altria has a vaping device called IQOS that has been approved for sale, but as part of its original investment in Juul, it cannot sell the device in the United States unless Juul is banned from selling to U.S. consumers for at least one year or if the value of Altria’s investment drops below $1.28 billion (10% of its original total).
Altria stock was trading down by about 2.2% shortly after the noon hour Tuesday, at $42.84 in a 52-week range of $39.30 to $57.88. The consensus price target on the stock is $54.89. Altria pays an annual dividend yield of 7.32%.
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