What happened

Shares of Altria Group (MO 0.95%) were sliding last month, as the Marlboro maker contended with a series of regulatory warnings from the Food and Drug Administration, which came closer to banning menthol cigarettes and flavored e-cigarettes.

As a result, shares of Altria, the biggest domestic cigarette seller, slipped 16%, according to data from S&P Global Market Intelligence. The stock gradually fell over a two-week span in the middle of November as investors reacted to a string of threats against tobacco companies.

MO Chart

MO data by YCharts

So what 

The bad news for Altria started on Nov. 9, when the FDA said it would propose a ban on menthol cigarettes as part of a broader crackdown on flavored cigarettes and e-cigarettes. Such a proposal could take years to be enacted, but it nonetheless signals the federal government's opposition to a fast-growing segment of the industry, e-cigarettes, as well as menthols, which have seen a slower decline than regular cigarettes. While Altria has limited exposure to both categories, investors are hopeful that tobacco companies such as Altria will be able to pivot to next-generation products such as e-cigarettes. Consequently, Altria shares lost 3% that day and continued to slide after that. 

A smoldering cigarette held between two fingers.

Image source: Getty Images.

In anticipation of the announcement, Altria said in October it will stop selling most of its flavored e-cigarettes and support legislation to raise the smoking and vaping age to 21. In December, the company said it will discontinue its Mark Ten and Green Smoke e-vapor products, taking a $200 million charge in the process. 

The news of the FDA's proposal hit hardest against JUUL Labs, the leading U.S. e-cigarette seller, and JUUL said it would pull sweet-flavored e-cigarettes from the market and shut down its social media accounts in response to concerns about minors' use of the product. At the end of the November after that announcement, reports emerged that Altria was in talks to buy a minority stake in JUUL, giving shares of the Marlboro maker a boost at the end of the month.

Now what  

In the first week of December, Altria made another big move, acquiring a 45% stake in Canadian marijuana grower Cronos Group (CRON -2.91%) for $1.8 billion. The deal comes after months of rumors that Altria was pursuing a marijuana company, and at one point the company seemed close to a deal with Aphria

Altria shares popped briefly on the deal, which gives it exposure to a potentially giant market, depending on how marijuana legalization plays out in the United States. It also signals the next chapter in the life of the company as it moves beyond conventional tobacco. Investors will want to pay close to attention to the evolving cannabis space, as Altria has warrants that allow it to take majority control of Cronos.