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The Securities and Exchange Commission is investigating whether Altria adequately disclosed to shareholders the risks when it spent $12.8 billion in 2018 to take a 35% stake in Juul, the people said.
The tobacco giant in January took a $4.1 billion charge on its Juul stake, following a $4.5 billion write-down in October.
Altria's investment initially valued Juul at $38 billion, making it one of the country's most valuable startups. But since then the e-cigarette maker has been battered by lawsuits, regulatory crackdowns and investigations into whether it marketed its products to underage children and teenagers.
Blamed for a surge in underage vaping, the startup voluntarily pulled most of its flavors from the U.S. market and scaled back its international expansion.
The SEC has issued subpoenas to Altria and Juul and both companies have responded, some of the people said. Juul has turned over documents including correspondence with Altria and financial projections Juul shared with Altria before the deal, one of the people said.
The SEC is a civil regulator that enforces U.S. investor-protection laws and accounting rules. Its enforcement arm has questioned whether public companies adequately disclosed the risks of big investments and moved quickly enough to reduce the value of impaired assets. The agency is currently litigating such a case with Rio Tinto PLC.
Announcing the second write-down in January, Altria's Chief Executive Howard Willard said he was "highly disappointed in the performance of our Juul investment." He cited a number of surprises, including a vaping-related lung illness that prompted U.S. health officials to warn consumers last year not to use e-cigarettes before they determined the illnesses were linked not to e-cigarettes but to vaping devices containing marijuana extracts and vitamin E oil.
He was pressed on the wisdom of the deal this week by shareholders and analysts in a private session at an analyst conference in Florida, according to a person who attended the event. Mr. Willard said Altria had recently revised its agreement with Juul and the new deal had the full support of Altria's board, this person said.
Under the revised agreement, Altria will no longer provide marketing and retail distribution for Juul as the companies had originally agreed. Altria will assist Juul with the submission of its products for authorization by the Food and Drug Administration to remain on sale in the U.S.
The new deal also gives Altria the option to launch its own e-cigarettes if Juul is prohibited by federal law from selling vaping products in the U.S. for at least a year or if the value of Altria's investment in Juul falls to $1.28 billion or less. The stake is currently valued at $4.2 billion.
Federal antitrust officials also continue to investigate the investment more than a year after the deal was made. The Federal Trade Commission has been looking into the Marlboro maker's control of shelf space and Altria's role in the departure of Juul's CEO last September and his replacement by an Altria executive. Altria has said it expects the antitrust review to be complete in the first half of this year.