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Juul Cuts Valuation for the Second Time
Juul Labs, Inc. CEO K.C. Crosthwaite noted that company’s latest move comes after a valuation at the end of the third quarter of 2020 placed Juul Lab at $67.64 per share. “Today’s valuation does not surprise me, and I expect other investors to also arrive at lower valuation marks that factor in our recent restructuring,” Crosthwaite said, according to Bloomberg.
Juul Labs is the producer of the Juul, which is arguably the most popular pod system on the market today. With an 800 percent increase in sales in 2018, he Juul had become a standard in the industry, and the company’s valuation stood at $38 billion. However, Juul Labs has been a victim of its own success.
The widespread use of the Juul and other pod devices among young people attracted concerns from the Food and Drugs Administration (FDA) and public health experts about the safety and long-term effects of these devices. This led to regulatory restrictions and a series of lawsuits, which ultimately affected Juul Labs’ profitability.
The company has since scaled back its operations in the U.S. to cut costs. According to Bloomberg, Juul Labs operating expenditure in the first half of 2020 stood at $934 compared to $2.6 billion in 2019. No doubt, the outbreak of Covid 19 and the subsequent lockdown played a contributing role in the company’s ability to cut down on its operational expenses. Vaping companies across the world were forced to shut down factories or reduce the number of workers that showed up during the lockdown. There was also a lull in shipping as demand dwindled.
So, what does This Mean?
If you love Juul products and you’re wondering what the lowering valuation and recent troubles the company has been dealing with means. Well, we can tell you that you’ll continue to see Juul products at online stores, like Ejuice Deals. It is unlikely that this will lead the company to fold anytime soon. Yes, the company may change its marketing strategy and may even rebrand its products, but there are no indications that the Juul is going away anytime soon.
In 2018, Altria Group, one of the world’s largest producers of tobacco products, invested $12.8 billion for a minority stake in Juul Labs. Despite recording some losses, Altria remains committed to its investment in Juul Labs. On Thursday, Nov/ 12, Altria officially announced that it would convert its non-voting shares in Juul Labs to voting shares. This would mean that the Malboro maker has some say in the future direction of the company.
Crosthwaithe had noted that Juul intends to invest some of the money it has been able to save from its lower operational costs this year in science and researching future products.
Altria’s decision to become a voting shareholder in Juul Labs would not go down well with the U.S. Federal Trade Commission (FTC). The commission has taken Altria to court in a bid to force the organization to sell its stake in Juul Labs, citing a conflict of interest. The move to become a voting shareholder contradicts Altria’s previous stance that it intends to be a passive investor in Juul. However, the company has made it clear that it does not intend to exercise its voting rights in Juul until the litigation with the FTC has been concluded.
Juul has been to halt the sale of many of its flavor pods over concerns that they are attracting teenagers to start vaping. In October last year, the company announced a decision to stop selling flavor pods with non-tobacco and non-menthol flavors.
“We must reset the vapor category by earning the trust of society and working cooperatively with regulators, policymakers, and stakeholders to combat underage use while providing an alternative to adult smokers,” Crosthwaithe said in a statement.
Apart from discontinuing the sale of some flavor pods, Juul also officially suspended its advertising and lobbying efforts in the U.S.
Like other manufacturers of electronic cigarettes and vaping products, Juul Labs is undoubtedly working on its Premarket Tobacco Product Application (PMTA) with the Food and Drugs Administration (FDA).
While the use-of-use and multiple flavor options may have made the Juul appeal to young people, it is clear that this device is serving its goal of helping adult smokers quit cigarettes. A study presented by the director of Health Economics and Policy Research at Juul, Dr. Shivaani Prakash, revealed that the Juul potentially led to up to 400 million less cigarettes sold in the first year it was introduced to Canada. As the popularity and use of the Juul increased in the country, the sales of cigarettes also dropped. This led researchers to conclude that the adoption of the Juul was responsible for the decrease in cigarette sales.