Juul Labs Inc. has secured a cash infusion from some of its early investors to avoid bankruptcy and plans to lay off roughly one-third of its global workforce, according to company officials.
The beleaguered e-cigarette manufacturer had been preparing for a possible chapter 11 filing amid a dispute with federal regulators over whether its products could remain on the market in the United States.
With the new funding, Juul announced to employees that it has halted its bankruptcy proceedings and is working on a cost-cutting program. According to company officials, Juul intends to lay off 400 people and cut its operating budget by 30% to 40%.
The investment agreement is the first component of a bailout package being discussed with two of Juul's largest investors. According to previous reports, Juul was in talks with the two longtime board members about a lifeline for the company.
The investment and restructuring plans, according to Juul, are a step forward. According to the company, the goal of the fundraising is to put Juul on a more solid financial footing so that it can stay in business, pursue its dispute with the Food and Drug Administration, and continue product development and scientific research.
The investment terms could not be learned. Other early investors may also contribute, according to the company. According to people familiar with the situation, a second part of the bailout is being discussed, which could cover short-term legal liabilities.
According to people familiar with the matter, the same two board members refinanced a Juul term loan of $300 million to $500 million in late September. According to the people, Juul refinanced that debt because the terms of the previous loan required Juul to keep a large amount of cash on hand, and the company needed to access more of its cash.
Juul vaporizers, which quickly became a teen status symbol, upended the tobacco market in 2018. Legislators and parents have blamed the startup for an increase in underage vaping. Thousands of lawsuits have been filed against Juul, alleging that it marketed to children and teenagers. Juul has stated that it has never targeted underage users. The company ceased sales of its sweet and fruity flavours in the United States, as well as much of its advertising in the country. It is no longer one of the most popular e-cigarette brands among teenagers.
The first bellwether trial, brought by the San Francisco Unified School District, was scheduled to begin this month but was postponed on Wednesday until April. A personal injury case brought by the mother of a minor is set to begin in January in the United States District Court for the Northern District of California.
The FDA ordered Juul's products off the market in June, then suspended the ban pending Juul's appeal. The company's sales have since slowed. The ban's uncertainty has made it difficult for Juul to obtain financing to fund its operations and legal settlements.