Altria Has a Juul in the Rough
On Dec. 20, 2018, U.S. Marlboro cigarette maker Altria (NYSE: MO) announced it acquired a 35% stake in the privately held e-cigarette company Juul Labs for $12.8 billion. When the news broke, Altria was trading around $51 per share (although the stock was trading in the low $60s before the rumors surfaced).
Over this summer and fall, a deluge of illnesses and deaths tied to vaping have surfaced. This has pressured Altria's stock price further causing its market cap to shed around $9.3 billion since the deal, essentially removing the entire investment from Altria's market capitalization. But this severe overreaction will soon correct itself as the vaping illnesses now appear tied to Vitamin E acetate, a substance that Juul does not use in its products.
On Nov. 8, the Center for Disease Control and Prevention (CDC) updated the public on its investigation into the vaping illnesses in a press release. It said, "There have now been 2,051 cases of vaping-related illnesses spread across 49 states, the District of Columbia and the U.S. Virgin Islands." The CDC also confirmed 39 deaths, with Massachusetts reporting an additional death last Wednesday, not yet confirmed by the CDC. While clearly a tragedy caused by a lack of regulatory oversight, clues are emerging as to what happened.
Source Fool.com
