Juul Labs Inc., an e-cigarette maker, may be able to avoid a potential bankruptcy filing. Two of its major investors, Nick Pritzker and Riaz Valani are holding talks to finance the company and refurbish its business, a WSJ report stated. Interestingly, the world’s largest tobacco product manufacturer, Altria Group Inc. (NYSE:MO) is also the largest shareholder of Juul with a 35% stake.
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While Valani is a California-based businessman and investor, Pritzker belongs to the promoter family of Hyatt Hotels. Both serve as Presidents on Juul’s board and wish to bail out the ailing e-vapor maker. Their investment would bring Juul back to its prior financial footing and enable it to fight short-term legal battles.
Juul has been looking for alternatives like a sale or a loan to revamp its business. Discussions with Valani and Pritzker remain at a very early stage, and no details of the deal have been obtained yet.
Recently, Altria ended its non-compete obligation with Juul as the carrying value of its investment fell to $450 million on June 30. Altria started with a $12.8 billion investment in Juul in 2018. The cigarette maker has seen its investment vanish over the years, especially in June 2022, when the U.S. Food and Drug Administration banned the sale of Juul’s products in America. However, the ban was lifted post-Juul’s appeal.
Nonetheless, Juul’s performance has deteriorated since. Also, legal battles have taken a toll on the company. Cases allege that Juul markets its products to underage users. Amid the allegations, there is a lot of uncertainty about whether Juul’s products will remain on the market or not. Should Juul file for bankruptcy, it would wash out Altria’s investment completely.
What is the Price Target for Altria?
On TipRanks, the average Altria price target of $48.50 implies 6.8% upside potential to current levels. Also, analysts have a Hold consensus rating on Altria stock based on one Buy and three Holds. Meanwhile, MO stock has lost 14.3% in the past six months vis-à-vis gaining 2.3% over the past year.
