Shareholders of e-cigarette maker Juul Labs saw their shares drop following the release of new reports indicating a possible investigation by the Federal Trade Commission (FTC). According to the report published Thursday, the FTC is apparently preparing to launch a probe that will be looking at Juul Labs' marketing practices.
Altria Group, one of the Juul Labs' largest shareholders with a 35 percent stake, saw its share prices fall by as much as 4.1 percent following the release of the report.
Philipp Morris International, which is currently in merger talks with Altria, also saw its shares drop. The tobacco manufacturing company's shares plummeted by as much as 2.7 percent late Thursday.
Juul Labs' had recently caught the attention of regulators after it implemented its global marketing strategy.
The main issue that regulators had pointed out was the company's use of young social media influencers to promote its various e-cigarette or vaping, devices to teens and non-smokers.
The company's marketing strategy apparently worked too well on younger audiences, resulting in a massive increase in teen vaping. Several investigations have been launched by the US House of Representatives and a number of state attorneys general into the company's marketing practices.
The FTC's probe will reportedly be examining the company's involvement in alleged deceptive marketing. This will include an investigation into whether or not the company was directly targeting minors. The FTC's investigation will apparently determine if monetary damages are needed for those who have already filed cases against the company.
Last year, the Food and Drug Administration (FDA) had conducted a surprise inspection at the company's headquarters in San Francisco. The FDA reportedly seized a number of documents during their inspection.
In May of this year, a group of lawyers representing Juul customers filed a class-action lawsuit. The group is seeking full refunds and an injunction that would prevent the company from marketing to young teens and non-smokers.
In response to the new, Juul released a statement mentioning that it was prepared to fully cooperate with any investigation on its practices. The company stated that it remains to be transparent to all government agencies and regulators. The e-cigarette maker also defended its actions and denied that it had marketed directly to a younger audience.
Since the probes on its practices became public, Juul has changed its advertisements to feature only adult smokers. The company has also halted all of its social media promotions. Juul also announced this week that it will be investing over $100 million as incentives for retailers to use enhanced age-verification systems to halt the selling of its devices to minors.
