According to Altria, the U.S. Food and Drug Administration’s (FDA) investigation into Juul’s smokeless tobacco products has caused its investment in the company to sharply drop. The FDA put marketing denial orders (MDOs) on all of Juul’s products in June 2022 to stop sales in the U.S.
The FDA followed that up with a temporary suspension of the MDOs in July 2022. That allows the products to still be sold in the U.S. while the agency conducts a further investigation into them.
Even so, Altria notes that its investment in Juul is now only worth about $450 million. To put that in perspective, the company’s investment in Juul was worth $12.8 billion when it was initially made.
MO Stock: Altria Plans to Stick With Juul
Altria notes that its agreement with Juul allows it to be released from non-compete obligations. However, doing so would cause it to lose board designation rights, preemptive rights, consent rights, and certain other rights. As such, Altria intends to keep its stake in Juul.
Altria points out that Juul’s current situation isn’t likely to improve. It doesn’t believe there will be a positive outcome to the FDA’s investigation. The company also warns that Juul could be heading for a bankruptcy filing as liquidity runs dry.
MO stock is down slightly as of Thursday morning.
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On the date of publication, William White did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.