The chief executive of Juul Labs, Kevin Burns, has stepped down in the wake of regulatory pressure and escalating controversy over rising vaping rates among teenagers and health risks stemming from e-cigarettes, reports The New York Times.
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Burns will be replaced by K.C. Crosthwaite, an executive from Altria, the tobacco giant that bought a 35 percent stake in Juul for $12.8 billion last year.
The move marks the second high-profile resignation this week. On Tuesday, we reported that WeWork executives and bankers have considered laying off up to 5,000 employees to cut costs, according to a new report from The Information, and that CEO Adam Neumann would step down.
But back to Juul. The development is not entirely a surprise as the company has made headlines (not in a good way) recently with news of “a spate of hundreds of vaping-related illnesses that have spread across the country.” In just the last week, as The New York Times reports, “Massachusetts announced a four-month ban on the sale of all vaping products; Walmart said it would stop selling all e-cigarettes and the F.D.A. (Food and Drug Administration) announced it had opened a criminal inquiry into the supply chain of vaping products and devices.”
Also, as our own Natasha Mascarenhas reported, the Trump administration earlier this month announced that it would ban the sale of most flavored e-cigarettes, according to many sources. The ban, partially inspired after the slew of mysterious deaths from vaping-related illnesses, has the potential to affect a company like Juul which sells a variety of pods — the cartridges that go inside of a vape — flavors, including mango and Crème Brûlée. According to the New York Times, though, Juul said it would not fight the ban, despite the fact it most certainly “would severely hurt its domestic sales.”
Spun out of cannabis vaporizer venture Pax Labs, JUUL launched its flagship nicotine vaporizer product in 2015, according to Fast Company, and has since raised a total of about $1.6 billion in cumulative equity and debt financing. Its most recent raise was a massive $1.2 billion round from Tiger Global Management in July 2018 that included participation that gave the company a $15 billion pre-money valuation, according to its Crunchbase profile.
In December 2018, we reported that Altria’s plans to put about $12.8 billion in JUUL were expected to take its valuation to about $38 billion. The deal at the time made San Francisco-based JUUL more valuable than Elon Musk’s SpaceX and Airbnb Inc., according to Bloomberg.
The genesis of the company actually goes back to 2004 when Bowen and Monsees, as Stanford grad students, begin developing an e-cigarette prototype out of foam. They ultimately formed an e-cigarette company called Ploom. Ploom’s ModelTwo product was acquired by Japan Tobacco International in 2015. The duo bought back JTI’s stake in their company and renamed it Pax Labs.
What launched as a device meant to reduce the definite harms of combusting tobacco now faces a global crackdown and the potential for JUUL to go up in smoke becomes a reality.
Illustration: Li-Anne Dias