Juul Labs has secured a cash bailout from two of its earliest investors and announced plans to cut jobs as part of a reorganisation aimed at bringing the Altria-backed e-cigarette group back from the brink of bankruptcy.
The vaping company had been considering a possible Chapter 11 bankruptcy filing as its cash reserves dwindled in the face of falling sales and pressure from regulators.
But longtime investors Riaz Valani, general partner at private equity firm Global Asset Capital, and Nicholas Pritzker, a San Francisco real estate billionaire who co-founded Tao Capital Partners, have agreed to throw the company a lifeline, said a person familiar with the matter.
The size of the bailout package has not been disclosed.
“Today, Juul Labs has identified a path forward, enabled by an investment of capital from some of our earliest investors,” the company said in a statement.
Along with the cash injection, Juul will cut 400 jobs, which amounts to about a third of its workforce, and reduce its operating spend by between 30 and 40 per cent. The plan was first reported by the Wall Street Journal.
Juul said the investment would allow it “to maintain business operations, continue advancing its administrative appeal of the [US Food and Drug Administration’s] marketing denial order and support product innovation and science generation”. The company added it was taking the “difficult but necessary step” of “separating from many valued colleagues”.
In July, Juul’s products were banned by the FDA for playing a role in the rise of underage vaping. But the DC Circuit Court of Appeals placed a stay on the marketing denial order and the FDA launched an additional review into its decision, allowing Juul to keep its products on the shelves.
Before the FDA ruling, sales of Juul products were already in decline as public concern mounted over their role in the surge in teen vaping. Last year, Vuse Alto, a product made by rival RJ Reynolds, a subsidiary of British American Tobacco, overtook Juul as the US’s best-selling vape product.
Altria, the cigarette maker behind the Marlboro brand in the US which owns 35 per cent of Juul, cut the value of its stake in the vaping company to just $450mn in July. Altria’s stake is now worth just 3.5 per cent of its original value. The Marlboro maker paid $12.8bn for a stake in Juul in 2018.
In September, Altria ended its non-compete agreement with Juul.