Juul dodges a bankruptcy bullet but will be forced to layoff 400 jobs. Photo credit:VaporVanity.com
Juul Labs was able to secure financing from two of its early investors, allowing it to stay in business, but the company will be cutting off 400 jobs as part of a reorganization.
A source close to the matter said the cash bailout came from real estate billionaire Nicholas Pritzker, co-founder of Tao Capital Partners and head of Hyatt Hotels, and Riaz Valani, general partner at private equity firm Global Asset Capital. The 400 layoffs, which amount to about a third of the company’s workforce, are part of a cost-saving plan to immediately cut Juul’s operating budget by 30-40%.
In a statement, Juul said, “This investment will allow Juul Labs to maintain business operations, continue advancing its administrative appeal of the FDA’s marketing denial order and support product innovation and science generation.”
Juul’s meteoric rise to the top of the US vape market five years ago also attracted a variety of legal challenges which impeded sales and led the company to face financial strain in recent years to the point where analysts expected the company to file for Chapter 11 bankruptcy protection.
One of the most recent setbacks Juul had to contend with was the US Food and Drug Administration (FDA) ordering the company to stop selling its vaping products this June followed by the agency placing a temporary hold on its initial marketing denial order and launching an additional review in July. Altria reducing its 35% stake in Juul to 3.5% of its original value (Altria paid US$12.8bn for a stake in Juul in 2018) that same month followed by the two companies agreeing to end Altria’s non-compete agreement in September compounded Juul’s troubles.