In the US smoking rates have declined, but people are still buying cigarettes which allows companies such as Marlboro maker Altria Group to make a great deal of money. It was thought that vamping was better than cigarettes until some young people became sick. However, the biggest company in the vamping space is called Juul and in December of 2018, Altria bought 35% for $12.8 billion.

In an article by Aishwarya Venugopal of Reuters, Altria has been writing down their investment to $4.2 billion at the end of December 2019.

For a number of years, Juul and other companies in the vamping industry were very profitable and had increasingly number of flavored e-cigarettes, which were targeted to the youth market.

Altria CEO Howard Willard said he is highly disappointed in the financial performance of the Juul investment and the company does not expect to receive earnings contributions from Juul over the next 3 years.

The e-cigarette companies are facing a May deadline to submit applications to the US Food and Drug Administration proving that their products provide a net benefit to public health. If the company fails to make its case. the US Food and Drug Administration rules, the products could be pulled from the market. Juul is working on a compelling and complete application.

Altria will stop providing services including logistics, distribution and access to shelf space to Juul and two directors of Juul will be designated by Altria.

Linking to dividend paying stocks, cigarette companies are legal and generate strong cash flow for investors. Every once in while they need to find something like vamping which seems to be both legal and profitable. The public reacted to vamping, but the companies have the ability to spend and write off vast amounts of money and still be profitable. Do you buy or not buy?

There are more questions than answers. till the next time – to raising questions.