Globally Known Vaping Brand NJOY Files for Bankruptcy
Latest update: On September 16, vaping company NJOY filed for bankruptcy protection in federal court in Delaware, United States.
NJOY, one of the largest e-cigarette manufacturers, had been on an upward trajectory in the cigarette alternatives market.
On September 16, the company filed for bankruptcy protection in federal court in Delaware. The move affected several deep-pocketed Silicon Valley investors, including Sean Parker, co-founder of the now-defunct Napster, and Peter Thiel, founder of PayPal, who invested $70 million in 2013 when NJOY was valued at $1 billion. Singer Bruno Mars was also an investor in NJOY and a supporter of e-cigarettes, becoming a vaping enthusiast during the surge in nicotine-related stocks.
Parker invested as much as $10 million in the company and at the time said that e-cigarettes had more potential than conventional cigarettes, adding that “the harm caused by traditional cigarettes to humanity will become obsolete.”
The bankruptcy filing came just five months after the FDA issued new regulations on e-cigarettes. Those rules quickly threatened the fast-growing multibillion-dollar industry, including tobacco giants Altria Group and Reynolds, which own the MarkTen and Vuse e-cigarette brands, respectively.
The Scottsdale, Arizona-based company is the first e-cigarette business to file for bankruptcy. Jude Gorman, general counsel for a restructuring research group, said, “All e-cigarette companies have been affected by the new regulations, but NJOY also has substantial debt it cannot repay.”
According to the filing, it had accumulated losses of $234.4 million. NJOY also sought buyers and hired Barclays in January to handle a sale process, but no buyer emerged.
The failure of NJOY’s King product was the biggest reason behind the bankruptcy filing, leading to a large number of returns of disposable vaping devices. According to the filing, total sales of the King product fell to $7.4 million in 2013, compared with a peak of $93 million during the same period the previous year.
