Juul Labs eyes bankruptcy as pressure mounts

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Following widespread speculation yesterday that Juul Labs was about to file for Chapter 11 bankruptcy, Bloomberg News and the Wall Street Journal reported that such a decision has yet to be made. It could, however, happen soon.

Speculation followed a tweet by Reorg Harvard reporter Zhang, claiming that Juul was “preparing to file for Chapter 11 bankruptcy.”

But the the wall street journal and Bloomberg previously reported — as early as June 24 — that Juul was working with advisers to address its financial challenges and was considering Chapter 11 bankruptcy as one of several options. In other words, Juul has been “preparing” for a potential bankruptcy filing for at least three months.

Chapter 11 allows a business to continue operating while it works with a court and its creditors to reorganize its finances. This does not necessarily mean the death of the company.

The newspaper reported tuesday evening that Juul has received requests from lenders and will “soon formally request debtor-in-possession financing options”, which (if pursued) would allow the company to maintain operations during the bankruptcy process. Bloomberg News reported basically the same thing.

“We will continue the process of preparing for both a restructuring and other strategic options as we determine what is the best path for our business,” a Juul spokesperson said, noting that the company is not has not yet settled chapter 11 (restructuring).

Juul has lost its flagship position in the convenience store/gas station segment of the vaping market, amid growing competition from Vuse and hundreds of disposable vaping products in recent years, which has reduced its market share by more than half. Altria Group last week terminated its non-competition agreement with Juulwhich means that Juul could soon face additional competition from products sold by its co-owner Altria.

Juul also faces a protracted fight with the FDA to keep its products on the market. At the end of June, the agency issued a marketing refusal order (MDO), commanding Juul products in the market. Juul received a temporary stay of the order in federal court the next day, and the FDA then backed off and put the MDO on hold until Juul’s request can be reconsidered. But it’s clear the agency has its sights set on Juul, and the company faces a long fight to get marketing approval.

In addition to growing competition and a hostile government regulator, Juul faces thousands of lawsuits from individuals, school districts, municipalities, states and Indian tribes, most of which have been consolidated into a huge multidistrict litigation (MDL) case in the federal district court in San Francisco. Defending these cases or settling them will be very expensive.

Juul also recently agreed to donate at least $438.5 million to dozens of US states and Puerto Rico over a period of 6 to 10 years. The deal settled allegations that he misled consumers and engaged in advertising and marketing aimed at young people.

Smokers created vaping without help from the tobacco industry or anti-tobacco crusaders, and I believe vapers have a right to continue innovating to help themselves. My goal is to provide clear and honest information about the challenges vaping faces from lawmakers, regulators, and misinformation brokers. I am a member of the CASAA Board of Directors, but my opinions are not necessarily those of CASAA, and vice versa. You can find me on Twitter @whycherrywhy

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