THE WALL STREET JOURNAL. Friday, March 13, 2020 |B3
BUSINESS NEWS
Juul co-founder James MonseesAGENCE FRANCE-PRESSE/GETTY IMAGES
A co-founder of e-cigarette
makerJuul LabsInc. is step-
ping down from the board.
James Monsees launched the
startup, then known as Ploom
Inc., in 2007 with Adam Bowen.
It catapulted to the top of the
e-cigarette market but was
blamed for a surge in teen vap-
ing. It has been buffeted by
regulatory crackdowns, law-
suits and investigations into
whether its marketing targeted
underage users.
Messrs. Monsees and Bowen
in October stepped down from
their jobs as chief product offi-
cer and chief technology officer
and moved into advisory roles
assisting the new chief execu-
tive, K.C. Crosthwaite.
“After 15 years on this tre-
mendous journey, it is with a
great deal of thought and con-
sideration that I have decided it
is time for me to move on from
Juul Labs,” Mr. Monsees wrote
in an email to staff Thursday.
“James’s vision has helped
transition millions of adult
smokers away from combusti-
ble cigarettes so far, and that
number will only grow,” Mr.
Crosthwaite wrote Thursday in
a separate email to staff.
Mr. Crosthwaite took the
helm in September. Since then,
Juul has halted U.S. sales of its
sweet and fruity flavors, cut
650 staff and scaled back its
overseas expansion.
Tobacco giant Altria Group
Inc., which owns a 35% stake in
Juul, said in January that under
a revised agreement between
the companies, the e-cigarette
maker would expand and diver-
sify its board.
Juul’s board previously had
seven members, all of them
men. Under the revised agree-
ment, the new board would
have nine members, including
two representing Altria, and
three independent directors,
one of whom Altria would nom-
inate.
Altria can’t appoint repre-
sentatives to Juul’s board until
the Federal Trade Commission
completes its antitrust review
of Altria’s $12.8 billion invest-
ment in the startup. The review
is still pending more than a
year after the deal.BYJENNIFERMALONEYA Juul
Founder
Gives Up
Board Seat
The company has struggled to attract sellers and reach consumers who have a plethora of options.JOHN GREIM/LIGHTROCKET/GETTY IMAGESWASHINGTON—Hundreds of
small, publicly traded compa-
nies, including biotechnology
firms, will see their audit re-
quirements eased under a rule
approved by the Securities and
Exchange Commission.
Advocates said the change
will allow those firms to cut
costs and invest the savings in
new products and technology,
such as lifesaving vaccines. But
one researcher found that many
of the firms that supported the
rule had accounting problems of
their own.
The rule, which was approved
Thursday, applies to companies
with annual revenue below $100
million and public shares worth
less than $700 million. Those
companies will no longer need
to have an auditor examine their
accounting systems and safe-
guards known as internal con-
trols, a requirement that has
been in place since the Enron
and WorldCom scandals of the
early 2000s.
With the change, “a company
trying to develop a vaccine for a
fast-spreading virus, somethingthat is now on all of our minds,
will be able to pour resources
and—importantly—manage-
ment’s time and attention into
that effort rather than into ob-
taining an internal-controls au-
dit,” SEC Commissioner Hester
Peirce said in a statement. Ms.
Pierce said comment letters from
companies supporting the rule
had encouraged her to vote for it.
One of them wasTeligent
Inc., whose chief financial offi-
cer, Damian Finio, wrote that the
rule would give it more time “to
develop high quality and com-
petitive products to treat the na-
tion’s most dire public health
concerns.”
But an analysis by Joe
Schroeder, an accounting pro-
fessor at Indiana University,
found that at least a dozen com-
panies that wrote letters of sup-
port had disclosed accounting
problems of their own. Some
had to restate earnings reports
due to errors, while at others,
auditors flagged “material weak-
nesses” in their internal controls
over financial reporting.
In Teligent’s case, both were
true. In an annual report filed
last April—less than fourmonths before it sent a letter to
the SEC—the drugmaker dis-
closed the need to “perform ex-
tensive additional work to ob-
tain reasonable assurance
regarding the reliability of our
financial statements.”
Among other problems, the
company said it lacked person-
nel and resources to implement
a new financial system. Teli-
gent’s stock price has fallen 97%
since mid-2017.
Teligent didn’t respond to
messages requesting comment.
Mr. Schroeder said the com-
panies he flagged are saying, in
effect, “We have accounting is-
sues, and we’re asking to get rid
of regulation that tells us to im-
prove our accounting.”
Thursday’s SEC decision is
part of a broader effort to en-
courage more companies to
raise money in public markets
by easing regulations. The SEC
estimates that 373 companies
will be covered by the change.
SEC Chairman Jay Clayton
said the new rule is aimed at
low-revenue companies “for
whom the cost of unnecessary
regulation is most acute.”
The vote to approve thechange was 3-1, with the com-
mission’s lone Democrat, Allison
Lee, dissenting.
“The final rule rests in part
on the unsupported hypothesis
that relieving companies of
modest additional costs” will
encourage more of them to go
public, Ms. Lee wrote in her dis-
sent. “There just isn’t evidence
for this intuition.”
Mr. Clayton said executives
must still certify that they have
evaluated and disclosed the ef-
fectiveness of their internal con-
trols, and companies will still be
required to hire an independent
auditor to examine statements.
But small companies with
high growth prospects—such as
a biotech firm that is testing a
promising treatment—may be
more tempted than others to
fudge their financial statements.
Mr. Schroeder and three
other accounting professors cal-
culated that for the average
company in 2018 now covered
by the exemption, an additional
dollar of revenue raised its mar-
ket value by $93. That compares
to a $2.47 increase in market
value for companies with more
than $100 million in revenue.BYPAULKIERNANSEC Relaxes Rule for Smaller
Companies to Audit Systems
ments, according to analysts
and people familiar with sports-
rights deals.
Walt DisneyCo.’s ESPN and
AT&TInc.’s Turner, the parent
of TNT, together spend about
$2.7 billion annually to show
NBA games nationally. In addi-
tion, regional sports networks
owned by media giants such as
Comcast Corp. and Sinclair
Broadcast GroupInc., among
others, air NBA games in local
markets.
Comcast also is the NHL’s
major broadcast partner. Mean-
while, ESPN, Turner and Fox
Corp.’s Fox all have MLB rights.
Losing NBA games will leave
a major hole in the TV net-
works’ prime-time schedules,
translating into lower ratings
that will harm their ad sales—
especially if the season doesn’tresume for the playoffs that
normally begin in April, analysts
said.
In the last NBA season, TV
networks brought in nearly
$600 million in ad revenue from
NBA games and $972 million
from the playoffs, according to
research firm Kantar.
Networks’ other major
stream of revenue—from the
channel-carriage fees paid by
cable-TV distributors—also
could be impacted. Distributors
require some TV programmers
to air a minimum number of
games; if they don’t, the car-
riage fees could be cut, accord-
ing to a report by Rich Green-
field, an analyst for LightShed
Partners. Since most of the NBA
season is complete, he said,
many TV programmers may
have met the quota for telecasts.Sports TV networks are fac-
ing a big problem: They have
virtually no games to put on the
air.
In quick succession over the
past 24 hours, the National Bas-
ketball Association, National
Hockey League and Major
League Baseball announced they
were suspending operations due
to concerns about the coronavi-
rus pandemic, and the NCAA
canceled its men’s and women’s
basketball tournaments.
Now, their broadcast part-
ners could face significant fall-
out. The networks that carry
NBA games will take a substan-
tial hit to advertising revenue
and could potentially be on the
hook for big rights-fees pay-BYBENJAMINMULLIN
ANDLILLIANRIZZONetworksTakeLossasSportsHalt
The number of people who
actively sell Tupperware prod-
ucts continued to shrink in its
latest quarter, dropping 12%
year over year to about
517,000, according to the com-
pany. That includes a 7% drop
in active sellers in the U.S. and
Canada, a 22% decline in Asian
markets and a 16% fall in South
America.
Tupperware also said Thurs-
day that sales for its last fiscal
year will fall 13% compared
with the prior year. Earnings
will drop to 25 cents a share
from $3.11 a share. In February,
the company said it needed to
delay filing its annual report as
it conducted a probe into ac-
counting issues in a business in
Mexico.
Tupperware concluded its
investigation into the account-
ing practices for the unit in
Mexico, saying the issues it
discovered were isolated, and
didn’t have a major effect on
the company’s overall financial
results or internal controls.
Shares of Tupperware rose
20% Thursday to $2.27. In late
December 2013, the stock
traded at $96.plethora of food-storage op-
tions and competing beauty
products available for sale on
e-commerce sites and in stores.
Since November, the com-
pany has been led by former
General Mills Inc. executive
Christopher O’Leary, a board
member who took over the
CEO role on an interim basis
after its last top leader stepped
down after about 18 months.
“I am confident that with
this management team, we can
modernize the Tupperware
model to give our sales force
the most innovative products
on the market, the best tech-
nologies to access consumers
and the best operations,” Mr.
Fernandez said in a statement.
He will also join the company’s
board, a move that will expand
it to 12 people.
Mr. Fernandez will take over
as CEO of Tupperware after
last serving as global president
at Avon, which wants to rei-
magine its direct-selling force
as online influencers. Tupper-
ware said he led the company’s
transformation efforts, working
in part to develop new ways of
reaching shoppers.Tupperware BrandsCorp.
appointed a new chief execu-
tive with a background in di-
rect selling, charging him with
reinvigorating the company’s
performance as it struggles to
reach consumers who have
moved away from buying kitch-
enware at home parties.
Tupperware on Thursday
said its board appointed Mi-
guel Fernandez, who previously
served in executive positions at
Avon Products Inc. and Herbal-
ife Nutrition Ltd., as CEO. He
takes over the top position at
the company April 6. Richard
Goudis, the former CEO of
Herbalife Nutrition, joined
Tupperware’s board of direc-
tors, the company said.
Best known for its plastic
food storage containers, Tup-
perware also has businesses fo-
cused on beauty and personal-
care products. The Orlando,
Fla., company depends on an
independent sales force to host
parties and distribute products.
But Tupperware has strug-
gled to attract sellers and
reach consumers who have aBYMICAHMAIDENBERGTupperware Names CEO
To Lead Comeback Effort
We are pleased
to announce the
following promotions
MARCH 2020
MANAGINGDIRECTORS
Anna Dragesic
Patrick Feigley
Adam Gubner
EXECUTIVEVICEPRESIDENTS
Olivia Albrecht
Keisha Audain-Pressley
Mehdi Ayari
Daniel Ballen
Jamie Bentley
Marta Bezoari
Philip Bufe
Jonathan Dabinett
Kevin Gray
Daniel He
Alex Heron
Ray Huang
Marco Iannone
Juanma Jimenez Sanchez
Liz Kraninger
Andrew Levine
Trip Lilly
Christine Long
Vijendra Nambiar
Alexandria Rausch
Christopher Santore
Vinayak Seshasayee
Rebecca Sheinberg
Martin Skinner
Sebastian Zilles
AUSTIN, BERMUDA, CHICAGO,HONG KONG, LONDON, MILAN,MUNICH, NEW YORK,NEWPORT BEACH, SÃO PAULO,SINGAPORE, SOLANA BEACH,SYDNEY, TAIPEI, TOKYO,TORONTO, ZURICHpimco.com
©2020PIMCO.