Investors question bailout of Juul Labs

Investors question bailout of Juul Labs

A group of investors in Juul Labs are challenging a financial rescue plan proposed by directors Nick Pritzker and Riaz Varani in November 2022, claiming the deal came at the expense of other investors, The Wall Street Journal reported. At the expense of profits, insiders benefit.

As a pioneer in the e-cigarette industry, Juul Labs went from dominating the U.S. market to fighting for survival in a short period of time. After initial success, the company's marketing practices came under scrutiny from regulators. Thousands of lawsuits accusing the company of contributing to the "epidemic" of underage vaping have taken a toll on the company's finances.

Juul Labs began seeking bankruptcy in June 2022 after the U.S. Food and Drug Administration ordered its e-cigarettes to be taken off the market and a court suspended the order.

To avoid bankruptcy, Pritzker and Varani refinanced Juul Labs' term loan in September 2022 and provided more funds to Juul Labs later that fall to cover operating costs. In the end, the two directors, along with Juul Labs co-founders James Monsees and Adam Bowen, backed a comprehensive legal settlement and took an equity stake in Juul Labs invest.

After reaching out to dozens of potential investors, Juul Labs completed a round of financing in October 2023, raising $1.27 billion. The payment includes funds committed to Juul Labs’ legal settlement by entities tied to Pritzker, Varani and Juul’s two co-founders, as well as an additional $45 million from the four investors.

Entities tied to Varani and Pritzker now own nearly half of Juul, while most other investors' shares were significantly diluted in the rescue effort.

An affiliate of the hedge fund D1 Capital Partners and two other investors sued Juul Labs in October 2023, saying that Pritzker and Varani "exploited their predicament for personal gain and harmed other Juul Labs stakeholders."

Juul Labs aims to raise another $330 million in 2024 as it works to keep existing products on the U.S. market and submit new e-cigarette products to the federal government.
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