Vape-maker JUUL’s market meltdown and regulatory struggles have lost significant value for its biggest investor.

The Richmond, Virginia, based tobacco company Altria announced during its latest earnings report that its stake in JUUL is worth $450 million, which is less than 5 percent of the original $12.8 billion in value. The write-down comes amid moves by the U.S. Food and Drug Administration to ban JUUL’s vape products. In spite of billions in losses, the tobacco giant hasn’t given up hope for JUUL.

"At this time, we continue to believe that these investment rights are beneficial to us. Therefore, we have not opted to be released from our non-compete obligations at this time, but we retain the option to do so in the future in accordance with our relationship agreement with JUUL," Altria said in a statement.

Altria further clarified in a statement that exiting the agreement would cost the company certain other rights like the right to board designation, excepting its ability to appoint one independent director if it retains at least 10 percent ownership.

In December 2018, Altria inked a deal to acquire 35 percent of the company for $12.8 billion.The deal between Altria and JUUL was an expensive bet that JUUL’s e-cigarettes would prove a lucrative alternative to combustible products like cigarettes during a multigenerational decline in the popularity of smoking. At the time, JUUL was already under intense scrutiny for sparking a surge in teen vaping and nicotine addiction. Two days before the deal closed, the U.S. Surgeon General Dr. Jerome Adams declared teen vaping “an epidemic” and warned parents specifically about JUUL and its “USB flash drive shaped e-cigarettes.”

Since then, JUUL’s value has slid in response to a number of regulatory hits and public relations fiascos. The most recent being a decision by the FDA, ordering its products pulled from shelves in the U.S. The agency said in a statement that the company’s applications for marketing authorization “lacked sufficient evidence to demonstrate that marketing of the products would be appropriate for the protection of the public health.” 

“This action by FDA reflects the agency’s steadfast commitment to carefully evaluating the science to ensure that only those products meeting its rigorous public health standards are granted marketing authorization. FDA has taken the proper steps to protect the health of all Americans,” U.S. Department of Health and Human Services Secretary Xavier Becerra said in a statement.

The decision was shocking to industry experts, considering the FDA has authorized JUUL’s competitors. A federal appeals court temporarily blocked the ban, and the FDA subsequently reopened JUUL’s application. Its products are permitted to remain on the market until further notice.

Altria’s 2018 deal with JUUL contained an agreement that Altria would not sell competing vaping products. But now that JUUL is valued below $1.28 billion, according to Jefferies analyst Owen Bennett, Altria has the option of exiting the non-compete. That would permit the company to explore other options like launching its own vape products or investing in another vape company. Bennett said the fact the company chose not to exit means it is still bullish on JUUL’s future.

“MO says it is not opting to be released at this time, and also say (sic) it believes its investment rights continue to be beneficial, suggesting MO thinks JUUL will be successful with its [premarket tobacco product application] appeal,” Bennett wrote.

According to Cowen analyst Vivien Azer, if JUUL receives FDA authorization, it would be a big win for Altria.

“...It would revitalize one portion of the company's reduced risk product (RRP) strategy, which we believe is becoming increasingly important, given the FDA's focus on several pieces of incremental combustible cigarette regulation (including a menthol ban and a very low nicotine policy),” Azer wrote in a July 6 note.

The popularity of smoking has been in decline for decades. In the mid-1960s, roughly 42 percent of adults in the U.S. smoked, according to an American Lung Association analysis of data from the Centers for Disease Control. As of 2017, that percentage had fallen to 14 percent among adults and just under 9 percent for children. Meanwhile, the popularity of vaping exploded in recent years among children in middle and high school, according to the American Lung Association.

Data from Nielsen, reported by the New York Times, shows that Vuse products were the top-selling vape products in the U.S. in late June and the previous 12 weeks. Vuse, which is owned by a subsidiary of Reynolds American, controlled 33.4 percent of the market, followed closely by JUUL, which controlled 33 percent of the market.