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By Kathleen Chaykowski and Alex Konrad
Juul Labs’ cofounders, James Monsees and Adam Bowen’s fortunes are set to rise from an estimated $730 million to more than $1.1 billion a piece on news that Altria is taking a 35% stake in Juul Labs at a $38 billion valuation. Bowen is Juul’s chief technology officer and Monsees is chief product officer.
The founders’ new net worth estimate of $1.4 billion is in part based on Forbes’ assumption that each founder owns about 1.75% of Juul, according to a source with knowledge of its financings. Forbes then takes a 10% discount on the valuation of private companies, due to uncertainty and lack of transparency. Each founder has sold more than $500 million in shares to date, the source says. Juul said in a statement on Thursday that Altria is investing $12.8 billion for a 35% stake in the e-cigarette company. Juul declined to comment on its valuation.
“We understand the controversy and skepticism that comes with an affiliation and partnership with the largest tobacco company in the U.S.,” Juul CEO Kevin Burns said in the statement. “We were skeptical as well. But over the course of the last several months we were convinced by actions, not words, that in fact this partnership could help accelerate our success switching adult smokers. “
Juul’s new valuation has more than doubled from the $16.2 billion when it raised money this summer. For Juul, a deal with Altria is likely driven more by strategic benefits than raising capital. Altria could help Juul access more brick-and-mortar shelf space, as well as give it access to research and marketing resources — not to mention Altria’s customer base of smokers, many of whom are trying to quit. Juul, which has captured three-quarters of U.S. e-cigarettes sales, could help Altria ensure it reaps the financial gains of the growing e-cigarette market and bolster its international reach. (Juul is sold in the U.S., U.K., Canada, Israel and Russia.)
However, as some Juul employees have pointed out, an Altria deal could discredit the company’s proposition that it’s striving to eliminate cigarettes by offering a safer alternative. While big tobacco companies are making and selling their own e-cigarettes (Altria sells e-cigarette Nu), tobacco firms’ financial interest in traditional smokes is still massive. Cigarettes made up 84% of the $100 billion in U.S. tobacco retail sales in the past year, while e-cigarettes and vaporizers accounted for just 3%, according to Wells Fargo in August.
Reports of Altria’s investment in Juul come amid growing pressure from regulators on Juul and other e-cigarette makers to show they can do more to keep addictive nicotine products out of the hands of middle and high schoolers, about 3.6 million of whom use e-cigarettes in the U.S. alone, according to National Youth Tobacco Survey data.
December 20, 2018 at 02:06PM
Forbes – Entrepreneurs