Altria plunges 10% after report says FDA will ban Juul vaping products from the US market

• Altria stock fell as much as 10% on Wednesday after The Wall Street Journal reported that the FDA plans to ban Juul vaping products.
• Altria paid $12.8 billion for a 35% stake in Juul in 2018 when the product was popular with teens.
• The FDA required all US e-cigarette manufacturers to submit their products for review in 2020, and Juul didn't make the cut.

Altria stock tumbled as much as 10% on Wednesday after The Wall Street Journal reported that the FDA plans to ban Juul vaping products from the US market as early as today.

Investors are selling Altria's stock because the cigarette maker purchased a 35% stake in Juul Labs for $12.8 billion in 2018. Back then, the investment looked smart as Juul's fruity vaping flavors caught on with teens and led to a surge in vaping among young adults.

But shortly after Altria's investment, flavored vape pods were banned from the US market and Juul saw a decline in sales. The e-cigarette company also faced scrutiny from regulators due to its marketing tactics that lured teenagers into picking up the habit of consuming nicotine.

The FDA required all US e-cigarette manufactures to submit their products for review in 2020, and based on reporting from the WSJ, Juul didn't make the cut. Altria most recently valued its stake in Juul at $1.6 billion.

Juul's market share of the US e-cigarette market has dropped to second place, behind Reynolds American's Vuse brand, according to the report. In 2021, the company saw net sales fall 11% to $1.3 billion while it recorded a net loss of $259 million, according to a disclosure to employees.

But the blow to Altria and its investment in Juul could be a boon for other US tobacco manufacturers that are pivoting to e-cigarettes, including Reynolds and NJOY Holdings. British American Tobacco, which owns Reynolds, saw its stock fall 1% in Wednesday trades.

Also putting pressure on the tobacco industry, serving as a double whammy for Altria, is the FDA's Tuesday announcement that it plans to lower the level of nicotine in cigarettes, effectively making them less addictive.

Reducing the addictiveness of cigarettes could lead to lower sales for tobacco companies over time, and for investors, it could alter the views of an industry that has historically proven defensive amid periods of economic stress.