(11-29-2018, 04:16 AM)DividendDragon Wrote:(11-28-2018, 05:31 PM)divmenow Wrote: MO great news after the bell. Report They will be taking a minority stake in Juul. Congrats to all those who bought low.
I'm initially lukewarm about this news (although I admit I haven't looked into it in any great detail).
I don't think that 'vaping' is a moaty business at all, it appears very competitive where consumers fave very low switching costs and competition drives discounting.
I have read about the alleged superiority of the product, the use of salts and the HUGE 75% market share - but remain unconvinced.
Vaping margins are far thinner than traditional cigarettes and I expect any margin to be competed away to the cost of capital in this commoditised industry moving forward.
It's great that MO are 'hedging' their bets but I'll have to await more details on the deal before making a judgement. Let's hope they didn't overpay!
As a MO shareholder, I like the news. Vaping is one of the few areas of growth in the domestic U.S. tobacco industry, and MO is grabbing a foothold in one of the biggest players in that market. Also, once the federal prohibition on cannabis comes to an end, I suspect Juul pods will be one of the primary delivery mechanisms.
As you say, though, the price they paid relative to the value of Juul stake received is critical information we don't have. Valuation is important.