MO stock has been stuttering in recent weeks due to Altria’s (NYSE:MO) stake in Juul, the company at the forefront of the vaping crisis, after the e-cigarette manufacturer announced it was cutting up to 500 jobs, as well as an executive shakeup.
Altria purchased a 35% stake in Juul, which accounts for about 70% of the e-cigarette market, for $12.8 billion USD less than a year ago. However, the onset of the vaping crisis, which has claimed 36 lives in the US and hospitalized over 1000 people, has wreaked havoc on that venture with MO stock dropping over 25% this year.
Federal and statewide bans on various different vape products have slashed Juul’s revenue streams and forced the company into an executive overhaul as well as a series of job cuts. MO shares recovered from the worst effects of the bans in recent weeks but still sits well off a pre-acquisition price of $61.23.
Three months ago, Juul appointed Guy Cartwright to the role of transformation and operations officer, a new position presumably created to handle the fallout of the vaping crisis. Cartwright will now move up to the position of CFO after the departure of industry veteran Tim Danaher. The executive shakeup comes as the fledgling start-up prepares to slash up to 15% of its workforce by the end of the year. MO stock is trading up slightly following the news to $46.38 USD.
The changes have undoubtedly been imposed by Altria after K.C. Crosthwaite, a former executive at the tobacco giant, replaced Kevin Burns as CEO last month. Crosthwaite faces the difficult task of turning Juul’s fortunes around. Under his leadership, the company has suspended all product advertising in the US and stopped selling Juul’s sweet flavors like mango and fruit. Juul has also said it will not lobby the Trump administration on its flavored vape ban, which led to MO stock’s biggest intraday slide of the year.
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Crosthwaite’s appointment came just a short time after talks between a merger of Altria and Phillip Morris (NYSE:PM), which were previously the one company, collapsed due to shareholder opposition on both sides of the deal. MO stock made slight gains in late September as investors cheered the termination of discussions between the two firms.
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