Top-selling U.S. electronic cigarette Juul continues to attract investors despite the socioeconomic and political controversies surrounding the products.

Juul Labs Inc., based in San Francisco, said Monday in a regulatory filing it had completed a $325 million public offering.

There were four unidentified investors. None of the proceeds will be used toward payments to executives, board members or securities promoters.

Juul is likely to use the net proceeds from the offering to expand its production and distribution.

That comes on top of gaining $650 million out of a $1.25 billion offering from 10 investors in July 2018, as well as $111.5 million of a $150 million offering from 23 investors in December 2017.

On Dec. 20, Juul and Altria Group Inc., owner of the top-selling traditional cigarette Marlboro, announced one of the biggest transactions in U.S. tobacco industry history.

Altria spent $12.8 billion to acquire a 35% stake in Juul. The companies said Juul Labs will continue to operate independently.

Juul holds a 74.5% U.S. market share, according to the latest Nielsen data primarily from convenience stores.

Altria has agreed not to buy additional shares of Juul Labs until December 2024, as well as not sell or transfer any of its 35% ownership stake for the same period.

That ownership moratorium is similar to the initial British American Tobacco Plc 42.2% ownership stake in Reynolds American Inc. in 2004 that could not be increased for 10 years. BAT spent $54.5 billion in July 2017 for the remaining shares in Reynolds.

“We are taking significant action to prepare for a future where adult smokers overwhelmingly choose non-combustible products over cigarettes by investing $12.8 billion in Juul, a world leader in switching adult smokers,” Howard Willard, Altria’s chairman and chief executive, said in a statement.

“We have long said that providing adult smokers with superior, satisfying products with the potential to reduce harm is the best way to achieve tobacco harm reduction. We strongly believe that working with Juul to accelerate its mission will have long-term benefits for adult smokers and our shareholders.”

Scott Ballin, past chairman of the anti-smoking alliance Coalition on Smoking or Health, called the investment “potentially a major game changer in the e-cigarette and cigarette market place.”

“If in fact Altria is serious about moving its harm reduction efforts forward and looking to a smokefree/cigarette free world, then we can expect that that is something that should be generally embraced.

“However, we should expect pushback from numerous other stakeholders,” Ballin said.

U.S. Surgeon General Dr. Jerome Adams issued an advisory in December to parents, teachers, health-care and government officials encouraging them to stop children and teens from using e-cigs.

“I am emphasizing the importance of protecting our children from a lifetime of nicotine addiction and associated health risks by immediately addressing the epidemic of youth e-cigarette use,” Adams said.

Adams joined Dr. Scott Gottlieb, former commissioner of the Food and Drug Administration, in referring to the surge in youth e-cig consumption as an epidemic. Adams cited many of Gottlieb’s recent recommendations about banning most e-cig flavors and targeting top-selling e-cig Juul in his presentation.

Altria will provide Juul with access to its innovative tobacco products retail shelf space. Juul’s flavored products — beyond tobacco, menthol and mint — will continue to only be available on www.JUUL.com under age-21 restrictions.

Altria will market Juul products through cigarette-pack inserts and mailings to adult smokers via Altria companies’ databases. Juul will gain access to Altria’s sales support in 230,000 retail locations.

Juul entered the mainstream retail marketplace in 2015 and has proven that a startup manufacturer can compete with the Big Three manufacturers: Philip Morris USA, R.J. Reynolds Tobacco Co. and ITG Brands LLC.

Juul is sold in the form of a pen or a USB device. That design makes it easy to hide, which Gottlieb said has contributed to “an epidemic” of teenage use, albeit based on a small sample size nationally.

The Food and Drug Administration announced Nov. 15 its plans to limit e-cigarette flavors to tobacco, menthol and mint.

It could take the FDA several years, and likely multiple lawsuits, before it could implement all of its regulatory changes involving the flavorings of traditional and e-cigarettes.

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rcraver@wsjournal.com 336-727-7376 @rcraverWSJ

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