MO

Why Altria Stock Was Sliding Today

What happened

Shares of Altria (NYSE: MO) fell today after the company was sued by the Federal Trade Commission over its acquisition of a minority stake in Juul Labs in 2018. The agency wants the Marlboro maker to unwind its investment in the e-cigarette company, alleging that the deal eliminated competition and violated antitrust laws. 

As a result, shares of Altria closed down 3.7% today after sinking as much as 6.2% during the session.

Three cigarettes on top a pile of tobacco

Image source: Getty Images.

So what

In a statement, Ian Conner, the FTC's director of the Bureau of Competition, said:

For several years, Altria and Juul were competitors in the market for closed-system e-cigarettes. By the end of 2018, Altria orchestrated its exit from the e-cigarette market and became Juul's largest investor. Altria and Juul turned from competitors to collaborators by eliminating competition and sharing in Juul's profits.

Altria responded, saying: "We believe that our investment in Juul does not harm competition and that the FTC misunderstood the facts. We are disappointed with the FTC's decision, believe we have a strong defense, and will vigorously defend our investment." 

The FTC's lawsuit is just the latest Juul-related headache that Altria has suffered. In December 2018, the cigarette maker invested $12.8 billion in Juul for a 35% stake, but has been forced to write down that investment twice in recent months as Juul has been hammered by regulators over marketing to minors and has been banned from selling most of its flavored pods. Today, Altria's investment is valued at just $4.2 billion.

Now what

If the FTC's lawsuit is successful, Altria will likely have to sell or spin off its stake in the e-cigarette company, possibly for less than it's currently worth. The agency also noted that Altria's MarkTen brand was the No. 2 e-cigarette brand in the U.S. by market share at one point in 2018 before Altria pulled it off the shelves. So the company did have its in-house e-cigarette brand, but it preferred to bet on Juul, which was the fast-growing industry leader at the time.

An administrative trial on the matter is set to begin on Jan. 5, 2021.

10 stocks we like better than Altria Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Altria Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of March 18, 2020

 

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Tags

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.