Altria Group Inc.
MO,
said Friday it has exercised an option to be released from non-competition obligations relating to its stake in Juul Labs Inc. In a regulatory filing, the tobacco company said the option included the right to terminate should the carrying value of its investment in Juul be not more than 10% of its initial carrying value of $12.8 billion. As of June 30, the carrying value had fallen to $450 million. Altria paid $12.8 billion in 2018 to acquire a 35% stake in Juul that valued the company at about $35 billion at the time. The stake has steadily lost value as Juul drew regulatory scrutiny as its fruity flavors and marketing were blamed for a spike in teenage vaping. The vaping company in early September agreed to pay at least $438.5 million in a settlement with more than 30 states. Altria said exercising the option means it has surrendered the right to convert Juul shares to single vote common stock, “significantly reducing our voting power.” Juul is now free to sell itself to another tobacco company, while Altria can invest in another vaping company or develop its own products. Altria shares were slightly higher premarket, but are down 13% in the year to date, while the S&P 500
SPX,
has fallen 24%.
