Talk about wealth vape-orizing.
The fallout from the vaping scandal, which has seen an unprecedented crackdown against a practice which until recently was seen as safer than conventional smoking and is now getting banned virtually everywhere following a streak of unexplained death, continued on Wednesday morning when tobacco giants Philip Morris and Altria Group announced they have ended their merger discussions.
“After much deliberation, the companies have agreed to focus on launching IQOS in the U.S. as part of their mutual interest to achieve a smoke-free future,” Philip Morris Chief Executive Officer André Calantzopoulos said Wednesday in a statement, referring to his company’s heat-not-burn device.
The companies said in a statement that they would focus on another smoke-free technology called IQOS in the U.S. electronic-cigarette market. Shares of Philip Morris jumped more than 6% in early trading, while Altria rose about 3%.
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Separately, we were almost right in our sarcastic comment from yesterday, the the criminal probe at Juul and sudden crackdown will cost the Altria CEO his job over last year’s $13 billion invesrment in Juul.
JUUL RESTRUCTURING WILL ELIMINATE SOME JOBS: DJ
That of Altria’s CEO?
— zerohedge (@zerohedge) September 24, 2019
Instead, moments ago we learned that the Juul CEO, the aptly named Kevin Burns is quitting first, and Altria Chief Strategy and Growth Officer K.C. Crosthwaite stepped down from the company to become the new CEO of Juul Inc. As a reminder Marlboro-maker Altria last year took a $13 billion stake in Juul last year when the company was valued at roughly $38 billion. The value of that investment is now said to be about 30-50% lower.
“I have long believed in a future where adult smokers overwhelmingly choose alternative products like JUUL” Crosthwaite said in the company statement. “That has been this company’s mission since it was founded, and it has taken great strides in that direction. Unfortunately, today that future is at risk due to unacceptable levels of youth usage and eroding public confidence in our industry.”
Juul, which makes the top-selling e-cigarette device in the U.S., has found itself at the center of an increasing controversy over vaping. A mysterious lung illness has killed seven people and sickened more than 500 others in recent months, and U.S. health officials have said that vaping among youth has reached epidemic proportions.
Juul also said in its statement on Wednesday that it would suspend all broadcast, print and digital advertising in the U.S., and refrain from lobbying the Trump administration on its guidance regarding proposed curbs on vaping products.
The resignation news follow a Tuesday report that Juul would restructure and cut back its staff as state, federal and international health regulators pull its fruit flavored pods off store shelves as U.S. amid a public health crisis; as part of the overhaul, the company is eliminating some of its 3,900 employees, slowing hiring and reviewing its current job postings, according to a person familiar with the matter, who declined to be identified because the decision hasn’t been made public.
U.S. prosecutors in California have reportedly opened a criminal probe into the maker of the popular e-cigarette. Juul’s been criticized by federal health officials and lawmakers for fueling a teen vaping “epidemic.” Its advertising practices have, in particular, been scrutinized for using young models and bright colors health officials say appealed to kids.