In December 2018, Altria Group (NYSE:MO) invested $12.8 billion in exchange for a 35% stake in electronic cigarette leader Juul Labs. Today, the tobacco titan is writing down the value of that investment by $4.5 billion.

When Altria purchased its stake in Juul, e-cigarettes were viewed as an important growth market for the tobacco industry. Sales volumes of traditional cigarettes have long been in decline, as smoking rates in the U.S. have fallen steadily for decades. Vaping products, in contrast, were growing at a rapid clip, and Juul had captured more than 70% of the market.

Vaporizers were seen by some as a healthier way to consume nicotine. But a recent outbreak of vaping related illnesses -- which has seen more than 1,400 people become ill and over 30 people die -- has thrown that view into question.

Surging teenage vaping rates have also drawn the ire of regulators. The Food and Drug Administration is moving toward banning all e-cig flavors, except for tobacco. While this is meant to curb teen use, it will also make Juul's vaping products less attractive to many adults and likely cost the company substantial revenue.

Additionally, the Federal Trade Commission investigated Juul for improperly targeting teenagers with its advertising. The FDA also accused Juul of illegally marketing its devices as safer than traditional cigarettes, without authorization from regulators to do so. Juul eventually went on to suspend its TV, print, and digital advertising in the U.S.

Due in part to these regulatory actions and the corresponding negative media attention, several major retail chains -- including Walmart, Costco, Kroger, and Walgreens -- stopped selling e-cigarettes.

This maelstrom of regulatory scrutiny, scathing media coverage, and lost retail distribution led to Juul CEO Kevin Burns stepping down in September. He was replaced by K.C. Crosthwaite, who previously was Altria's chief growth officer.

A more somber outlook for Juul and the vaping industry

Altria's multibillion-dollar writedown of its Juul investment reflects the company's estimation of how these recent events will impact the e-cig leader's sales and earnings, both current and future.

In its third-quarter earnings release, Altria said, "While there was no single determinative event or factor, Altria considered impairment indicators in totality, including: increased likelihood of U.S. Food & Drug Administration (FDA) action to remove flavored e-vapor products from the market pending a market authorization decision, various e-vapor bans put in place by certain cities and states in the U.S. and in certain international markets, and other factors."

It could be forced to write down its investment even further should new information compel it to reduce its estimates. Shareholders may find this disconcerting, as many of the factors that led management to lower its valuation of Juul were unforeseen.

"Of course we're not pleased to have to take an impairment charge on the Juul investment," CEO Howard Willard said during a conference call with analysts. "Certainly in the range of scenarios when we made our investment in Juul, we did not anticipate this dramatic of a change in the e-vapor category."

Still, Altria is standing by Juul for the time being. "Despite this impairment charge, we remain committed to Juul's success," Willard said.