At first, I wasn’t too concerned about the impact of the controversy surrounding vaping on marijuana stocks.  But then I saw the ABC News report that suggested the health problems caused by vaping had more to do with THC and less to do with nicotine. 

“This outbreak does not appear to be associated with traditional legally-sold e-cigarettes, but with illicit and sometimes counterfeit THC vaping cartridges,” said Dr. Michael Siegel, a professor at the Boston University School of Public Health.

Back in July, I recommended Aphria (NYSE:APHA) because of its big push into vaping. Now, I’m wondering if Aphria’s vaping connection is going to hurt Aphria stock as more information comes to light about the negative health consequences of vaping THC. 

If you own Aphria stock, I wouldn’t sell this growth and value play, but I would keep a close eye on the news surrounding vaping. It’s a very fluid situation that could change in a matter of hours, not days. 

“It’s a mistake, in my mind to constrain our thinking on this too early because we may not see important associations that might explain what’s happening,” Frank Leone, director of Comprehensive Smoking Treatment Programs at Penn Medicine, stated in the ABC report.

So, take a deep breath (no pun intended), and consider the best case, worst case, and most likely scenario of the current health crisis. 

The Most Likely Scenario

I think it’s highly unlikely that regulators are going to completely exonerate THC. 

The  idea that THC could be given a completely green light is merely wishful thinking by those who own Aphria stock or one of the other cannabis companies that are committed to the vaping market. Among the cannabis firms in the latter category are Cronos Group (NASDAQ:CRON), whose 45% owner, Altria (NYSE:MO), also has a 35% stake in Juul Labs, the leading manufacturer of e-cigarettes.

Juul Labs is currently facing a criminal probe by the U.S. Attorney’s Office for the Northern District of California. While the nature of the probe hasn’t been disclosed, you can bet that it’s got something to do with vaping. 

However, as Dr. Siegel stated, a lot of water will pass under the bridge before any conclusion is made regarding vaping,

“We don’t know how kids are purchasing these products and what the distribution channels are,” Siegel said. “We don’t know exactly what component, substance, or chemical in the THC vape carts is causing the illnesses. We don’t know whether there is more than one chemical or product involved,” he added.  

The most likely scenario is that all companies manufacturing and selling vaping products in the U.S. are going to face a higher level of scrutiny than they have up to this point.

In Canada, where all cannabis-related products are regulated in a rigorous manner by Health Canada, the likelihood of THC vaping becoming a significant problem isn’t nearly as high. 

“Personally, I am very worried about what I’m reading in the U.S.,” Aurora Cannabis (NYSE:ACB) Executive Chairman Michael Singer said on CNBC on Sept. 12. “In Canada, it’s very different, and we’re heavily regulated by Health Canada, which is a good thing,” he stated.

Sometimes regulations are good. 

The Worst-Case Scenario

I think the worst possible outcome from this health scare is that Congress and the President decide to slow down the efforts to legalize cannabis at the federal level. 

If that were to happen, shareholders of Canopy Growth (NYSE:CGC), whose $3.4 billion deal to buy Acreage Holdings (OTCMKTS:ACRGF) depends on federal legalization, would be back to square one when it comes to penetrating the U.S. market. 

And all of the Canadian players, including Aphria, would have a much bigger hill to climb if they had to capture the U.S. market one state at a time. I don’t think anyone would benefit  from federal legalization more than Canadian cannabis companies. 

Another terrible outcome would be the complete outlawing of THC vaping. That wouldn’t solve the problem, but it would cause marijuana stocks in both Canada and the U.S. to plunge. 

“And even though the New England Journal of Medicine has suggested that both THC and nicotine products are to blame, as of now, no legitimate vape company has been implicated, giving further credibility to the claims that this is a black market THC problem, not a vape problem,” stated Foundation for Economic Education senior writer Brittany Hunter. 

If you own marijuana stocks, you owe it to yourself to read Hunter’s piece on ending marijuana prohibition. Her commonsense approach to the vaping issue is 100% on the money.

The Best-Case Scenario

The best-case scenario is the legalization of cannabis at the federal level, with appropriate regulatory oversight to ensure that black-market products can’t get into the hands of unsuspecting consumers. 

“If government officials were serious about solving the vape crisis, they wouldn’t waste their time trying to ban nicotine vapes. Instead, they would end federal marijuana prohibition, thereby creating a legitimate market where consumers could safely purchase products,” Hunter wrote. 

Ultimately, I believe the federal government will do the right thing and legalize cannabis while penalizing those in the black market who are willing to expose consumers to possible health issues. 

Given all the positive health aspects of cannabis, it would be foolish to do otherwise. 

The Bottom Line on Aphria Stock 

At the end of the day, I believe that Aphria stock is an attractive marijuana stock.  

That said, given the vaping crisis we’re currently in, investors should expect a lot more volatility in Aphria stock.

But under $6, it’s worth buying. 

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.