Who is the Biggest Winner Out of the Vaping Ban and JUUL Debacle?

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The Trump administration has proposed a controversial ban on flavored e-cigs produced by companies like JUUL or vaping as a response to an outbreak of lung disease that has reportedly affected hundreds of individuals to date.

“The Trump Administration is making it clear that we intend to clear the market of flavored e-cigarettes to reverse the deeply concerning epidemic of youth e-cigarette use that is impacting children, families, schools and communities. We will not stand idly by as these products become an on-ramp to combustible cigarettes or nicotine addiction for a generation of youth,” U.S. Health and Human Services Secretary Alex Azar said.

Stock price of Altria Group (owner of JUUL) up slightly on the day despite vaping and e-cig ban proposal
Stock price of Altria Group (owner of JUUL) up slightly on the day despite vaping ban proposal. | Source: Yahoo Finance

Most vaping stocks in the likes of Vapor Group plunged by more than 10% following the release of the official statement of Secretary Azar; JUUL and Imperial Brands were the notable exceptions.

Trump administration’s hard stance on vaping won’t affect JUUL, e-cig and big corporations as hard

JUUL, Blu eCigs and many major vaping brands are owned by tobacco conglomerates like Imperial Brands and Altria that possess market capitalization in the range of $20 billion to $80 billion.

Although the stock of Altria was downgraded by Piper Jaffray analyst Michael Lavery earlier this week due to its likely controversial merger with Philip Morris, analysts have emphasized that the downgrade gears more towards the merger rather than JUUL and vaping scrutiny.

“We have less confidence in Altria’s outlook following company discussions between Altria and PM of a potential merger of equals. We do not know the terms of a deal, if one happens, but any interest in a deal without a premium could suggest more stress on the underlying fundamentals and management’s outlook for the future than we had appreciated,” said Piper.

However, Lavery noted that the controversy around JUUL and the FDA’s criticism towards the e-cigs company could lead iQOS to benefit, an electronic cigarette sold by Philip Morris that enables users to smoke traditional cigarettes.

If Altria, which remains relatively unaffected by the scrutiny on JUUL, and Philip Morris push forward with the planned merger, IQOS, JUUL and traditional tobacco cigarettes will be distributed under one parent company, which would lessen the negative impact of the ban on e-cigs and vaping.

“We expected cigarette volume declines could potentially moderate and return to more typical historical levels, and iQOS is likely to benefit. However, before any potential benefit would be clear, we expect Altria’s stock would first trade off on negative FDA news, especially given the $13 billion it septn on its JUUL stake,” Lavery said.

Strategists anticipate the demand for iQOS to increase as it is considered to be a heating system for traditional tobacco products that merely decreases the release of more harmful chemicals in cigarette smoke, not as an e-cig.

If the proposed ban on JUUL leads to a drop in e-cigs or vaping usage and demand, some anticipate that it could lead to iQOS and traditional tobacco companies that operate e-cigs brands benefiting off of it.

Last modified (UTC): September 12, 2019 1:06 PM