JUUL Raises $325 Million

Written by Jennifer Clark
Posted August 21, 2019

On Monday morning, e-cigarette giant JUUL Labs filed paperwork with the SEC. In its filing, the company indicated that it had raised $325 million in a transaction. JUUL wasn’t specific in the paperwork about the ratio of equity to debt offered. A source told Reuters that JUUL sold convertible debt in a bridge financing to bolster its balance sheet.

This might come as a surprise — the company is 35% owned by Marlboro maker Altria Group Inc., which gained this ownership for a $12.8 billion price tag. Altria Group has been focused on growing internationally with the JUUL brand.

Recently, JUUL had product launches in South Korea, the Philippines, and Indonesia. This all comes at a time when the U.S. is taking regulations on e-cigarettes very seriously. In fact, the city where JUUL is headquartered has just approved an ordinance that would ban the sale and distribution of e-cigarettes until manufacturers receive the U.S. Food and Drug Administration’s approval.

Over the last few years, there has been growing research revealing the harmful effects of e-cigarettes. Keep in mind, Nicotine, the toxic, addictive chemical, is still in e-cigarette products. 

Research from the Centers for Disease Control and Prevention (CDC) shows that nicotine use among U.S middle and high school students rose. It also found that the number of underage tobacco and nicotine users “increased 36% — from 3.6 million to 4.9 million students — between 2017 and 2018.”

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There have been regulations on tobacco and other nicotine products for a while, but those regulations didn’t include accessories for tobacco and nicotine products. However, in 2016, a federal ruling from the FDA and the Department of Health and Human Services (HHS) expanded the range of tobacco and nicotine products to include their accessories. 

Those accessories, which include nicotine-containing gels and liquids, will also be subject to premarket review by regulators. This means electronic cigarettes will be reviewed premarket by the FDA. 

More regulations continue to be put in place. In July, a U.S. court ruled that e-cigarette companies will need to submit applications to the FDA within 10 months (instead of by 2022) to remain in the market. These types of regulations are crucial, especially after the CDC's most recent announcement.

This past Saturday, the CDC announced that it’s investigating a puzzling increase in severe lung disease cases that are linked to e-cigarette product use or “vaping.”

It said that between June 28 and August 15, health officials have counted 94 probable cases of severe lung illnesses in 14 states. While there is no conclusive evidence that indicates an infectious illness behind these cases, there was only one factor that all cases had in common — vaping. More investigations will be needed before making a conclusion on what exactly caused these 94 cases of severe lung illness.

The U.S.'s recent strict regulations on e-cigarettes and nicotine vaporizer products could put JUUL in a very tough position and jeopardize its future and growth. The company does seek to expand its products abroad, but that might not be enough to keep it afloat in this industry. 

There is still a lot to research into nicotine vaporizer products needed, and recent findings don’t really provide much optimism for this sector. People know nicotine is an addictive substance, but what they don’t know is how e-cigarettes could affect their health and whether they could have even more damaging effects than cigarettes and tobacco products. If you’re a nicotine user, I wouldn’t get caught up in the glamour of a new product. Better to be safe and wait to see what the FDA and CDC decide about e-cigarettes before trying.

Until next time,

Jennifer Clark
Pro Trader Today
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