According to anonymous sources cited by The Wall Street Journal, Juul Labs is in talks with two long-term investors about a bailout plan to help avoid bankruptcy.
According to reports, Nick Pritzker, heir to the Hyatt hotel chain, and California investor Riaz Valani are considering raising funds to cover the ongoing operations and recent legal liabilities of electronic cigarette company Juul. Prior to Altria group's acquisition of a 35% stake in the company for $12.8 billion in 2018, Valani and Pritzker were reported to be Juul's largest shareholders, a source told the Wall Street Journal.
The aim of the bailout is to assist Juul in continuing its operations and in resolving the controversy surrounding the presence of Juul products in the US market with federal regulatory bodies. Juul Labs was once an undisputed leader in the domestic electronic cigarette market, but has been struggling to overcome regulatory scrutiny and legal challenges in its marketing practices.
On June 23, 2022, the U.S. Food and Drug Administration (FDA) rejected Juul Labs' application for its tobacco product prior to market release and ordered the company to remove its products from the market. Juul appealed the decision and on July 5, the FDA suspended its marketing denial order (MDO) and announced it would review the decision after determining "unique scientific issues that require additional review" exist in the application.
The uncertainty surrounding the FDA ban has made it difficult for Juul to secure funding for legal settlements. The company has been seeking alternative solutions to avoid filing for bankruptcy. Earlier this month, Juul began discussing financing options with lenders that could potentially allow the company to file for Chapter 11 bankruptcy.
In a statement to The Wall Street Journal, Juul announced that it will continue to explore various strategic options to ensure the safety of its business and address the impact of the FDA’s recent suspension. The company remains committed to its mission of providing a tobacco alternative for adult smokers while combating underage use.
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