$10.1m follower assets
$MO Altria, Noise Regarding JUUL
JUUL is NOT consolidated into $MO Altria's financials. There will be an appeal. If removed, potential marginal + for cig vols.
Equity stake has already been written down by more than 80% over the past few years.
Majority of the damage was not done today, but rather when Altria massively overpaid for their 35% stake in late 2018.
I addressed this 2 weeks ago in my writeup (see link below)
In the valuation portion, I specifically assigned 0 value to JUUL, i.e., marked down equity investment to 0.
If you're focused on fcf, today's news likely doesn't change your view much.
Have heard you talk about the tobacco industry a bunch and it is definitely an interesting one to invest in. Great perspective on the industry!
I was looking for your update on the Juul ruling. Glad to hear that it is far from thesis-breaking.
1000% be an appeal. This just looks like they targeted JUUL while keeping its competitors products on shelves?
@paulcerro We do not have details yet. They could very well deny JUUL v1, which would then be appealed and stay on market during process
Wow, 80%, what was the reason for that?
@joeyhirendernath Pre-emptive moves to cut advertising, flavors, etc ahead of regulation. Over the years, JUUL has massively lost market share. Altria has written down its stake multiple times to reflect the weakened underlying operations.
As Altria recognizes its stake as an equity investment in its finances, the impairments have beaten up reported earnings, while operating companies cash flows remain unaffected.
If JUUL is off the US Market for over a year, the majority of Altria's obligations are voided. Same goes with if their stake drops below 10% of othe riginal value ($1.28b). Then $MO could re-enter ENDS market with its own brand. If it's too late is an entirely different question.
Will be fascinating to see it unfold regardless.
@devinlasarre Wow, this was a great response, thanks for all that context Devin, makes sense to me.
