Juul discusses a possible bailout with its two biggest investors

Cato Institute Senior Fellow Jeffrey Singer joined ‘Kennedy’ to discuss that the FDA has ordered vaping company Juul to withdraw its product from the US market.

Juul Labs Inc. is in talks with its two biggest investors for a bailout that could help the e-cigarette maker dodge its bankruptcy filing, according to sources familiar with the matter.

People, Hyatt Hotels heir Nick Pritzker and California investor Riaz Valani said they’re considering investing money to cover the vaping company’s operations and short-term legal obligations. Mr. Pritzker and Valani were early investors in Juul, long-time directors and among the company’s largest shareholders.

The goal of the bailout will be to put Juul on a more solid financial footing so it can stay in business and maintain a dispute with federal regulators over whether its products will stay on the US market. The terms of the investment could not be learned.

At a Juul store in Jakarta, Indonesia, December 30, 2019, a shopkeeper shows customers a Juul vape vape. REUTERS/Ajeng Dinar Ulfiana/File Photo (REUTERS/Ajeng Dinar Ulfiana/File Photo / Reuters Photos)

JUUL REPORTS TO FDA FOR NOT DISCLOSING DOCUMENTS FULING E-CIGARETTE PROHIBITIONS

The deal has not been finalized and Juul may decide not to pursue it. The company is also preparing for a potential chapter 11 application and has recently added two restructuring experts to its board of directors. Mr Pritzker declined to comment, and Mr Valani did not respond to a request for comment.

Mr Valani and Mr Pritzker were Juul’s largest shareholders before Altria Group Inc. bought a 35% stake in the company for $12.8 billion in 2018. People said nearly all of that money was paid out as employee bonuses and shareholder dividends, with more than $2 billion to Mr Valani and more than $1 billion to Mr Pritzker.

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B.C	ALTRIA GROUP INC.	45.78	+0.33	+0.71%

In June, the Food and Drug Administration ordered Juul’s products off the market, then paused the ban pending Juul’s appeal. Since then, the company’s sales have slowed. It faces thousands of lawsuits for allegedly marketing it to children and teenagers. The first lawsuit filed by the San Francisco Unified School District will begin next month. Other cases will be tried next year. Juul said it never targets underage users.

LOS ANGELES, CA – JUNE 22: Juul e-cigarette packs go on sale on June 22, 2022 at the Brazil Outlet store in Los Angeles, California. The Food and Drug Administration (FDA) ordered Juul Labs Inc. to remove the e-cigarette pro product. (Photo by Mario Tama/Getty Images/Getty Images)

JUUL AND FDA AGREE TO DELAY THE COURT ACTION WHEN E-CIGARETTE PROHIBITION IS PENDING

The uncertainty around the FDA ban has made it difficult for Juul to secure funding for legal deals. Juul is looking for an alternative, such as a sale, investment or loan, that can avoid filing for bankruptcy. Earlier this month, Juul began discussions with lenders for financing that would move the company to a potential chapter 11 filing.

Juul was in the process of filing for bankruptcy when serious discussions began earlier this month about a potential investment by one of the people, Mr. Valani and Pritzker.

Chantel Williams exhales a puff of steam from a Juul pen on April 16 in Vancouver, Wash. The UK and other countries have been successful in promoting e-cigarettes as a lower-risk alternative to smokers, without seeing an increase in e-cigarettes by minors. But they are a (AP)

FDA’S JUUL E-CIGARETTE PROHIBITION IS DELAYED BY COURT OF APPLICATION

In a statement Monday, Juul said it continues to explore a variety of strategic options to secure its business and address the impact of the FDA’s ongoing order, “while we fight to uphold our mission of keeping adult smokers away from smoking, we fight underage use.”

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Mr. Pritzker, 77, is a member of a wealthy Chicago family that founded Hyatt Hotels Corp. and sold the Conwood smokeless tobacco company to Reynolds American Inc. for $3.5 billion in 2006. He previously served as vice president of Hyatt Hotels Corp. and president of Hyatt Development Corp., which oversees hotel development projects.

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H	HYATT HOTELS A.S.	89.78	+1.76	+2.00%

Mr. Valani, 46, worked at brokerage firms in New York before starting an investment firm in San Francisco that invested in technology companies. He was the second venture capitalist to invest in Juul. He is the general partner of Global Asset Capital LLC.