New York hedge fund Mudrick Capital Management has won big in its nearly six-year investment in e-cigarette company NJOY Holdings.
Marlboro maker Altria Group on Monday agreed to buy NJOY, one of the few e-cigarette companies whose products have federal regulatory approval, for at least $2.75 billion. Assuming the deal goes through, Mudrick’s NJOY shares have paid out about $75 million over the years and are worth about $1.33 billion, according to people familiar with the company, with an estimated profit of $1.26 billion. Investors managed about $3.4 billion at the end of the year.
The investment has an average internal rate of return (before fees) of over 100%, said a person familiar with the matter. In contrast, another lucrative deal hedge funds have been waiting for, Hollywood studio MGM Holdings, which reached a deal to sell to Amazon.com for $8.5 billion, including debt, in 2021. The deal earned MGM’s largest company about $2 billion. Shareholder, Anchorage Capital Group. Given that the investment was made over a decade ago, his IRR for that deal in Anchorage at the time was about 16% after deducting fees.
Mudrick helped hire NJOY’s management team, has a majority on its board and has provided growth capital for years, said people familiar with the company. Mudrick founder Jason Mudrick will also chair the board in 2022 and oversee the sale process.
The deal includes an additional $500 million if the Food and Drug Administration approves additional NJOY products.
Mudrick purchased a 51% controlling stake for $20 million shortly after NJOY went bankrupt in early 2017. Mudrick has added and sold part of his stake over the years, believing that increasing the distribution of the product under new management could turn NJOY upside down for him. and with more money. Longer term, Madrick believed NJOY could gain limited regulatory approval for its e-cigarette products.
Early on, some investors lamented that they were missing out on Juul Labs’ dominance at the time. Industry competitiveness was later overturned. Altria spent about $13 billion on his Juul stake in 2018, only to see that valuation evaporate.
