Given the disappointing financial performances of cannabis firms in recent months, the sector has suffered tremendously. But just as a bottom appeared to form, another headwind emerged in the form of the vaping crisis. Because of the nasty fallout from this escalating health epidemic, Cronos Group (NASDAQ:CRON) and specifically CRON stock took a dive.
But why? In my opinion, this is where Cronos Group stock is suffering from an immediately acute form of the Mandela Effect — which is a catchy phrase for the phenomenon describing collective false memories. We’re seeing a rush of judgment on incomplete information.
Several states have banned, or have attempted to ban vaping to various degrees, including Michigan, New York, Massachusetts and Rhode Island. Citing health emergencies and unwillingness to wait for federal vaping guidelines, state officials have taken matters into their own hands. Publicly, these draconian measures put vaping in a bad light, which currently hurts CRON stock.
Call it a case of extremely bad timing. While the health crisis snowballed, CRON pushed ahead with its plans to launch cannabis-based vaping products to the Canadian market. Because anything to do with vaping is under heavy scrutiny, Cronos Group stock printed more red ink.
Despite my bullishness for cannabis companies, I firmly believe the uproar is a mistake. Many investors are acting on bad information and the mainstream media isn’t helping matters. Despite the immediate pain, here are three reasons to consider a longer-term view of CRON stock.
Nicotine? THC? Who Knows?
When the Centers for Disease Control and Prevention first announced its findings on vaping-related illnesses, its warning for the American people was clear: Stop vaping immediately.
Interestingly, though, the CDC’s federal partner for this issue, the U.S. Food and Drug Administration, could have demonstrated solidarity. Instead, the FDA made no such pronouncements, but primarily recommended not using “vaping products that contain THC.” Further, it advised against street-bought vaping devices, especially because they contain illegal modifications such as “THC or other oils.”
This is where the longer-term opportunity for Cronos stock, along with impacted rivals such as Canopy Growth (NYSE:CGC) comes into play. With a growing body of evidence, the CDC has recently modified its recommendations to avoid “using e-cigarette, or vaping, products, particularly those containing THC.” That emphasis is mine.
In other words, we’re still in the investigation phase. Thus, the public is determining guilt for CRON stock without hearing all the evidence.
And this spread of incomplete and potentially false information is worse than you might think. For instance, the media pegged nicotine as a possible compound responsible for vaping-related illnesses. Yet scientific debate remains robust over whether nicotine is actually harmful.
To quote one source, Ann McNeill, a professor of tobacco addiction at the Institute of Psychiatry, Psychology and Neuroscience at King’s College London, adamantly stated that “We need to de-demonize nicotine.”
To me, that doesn’t sound like the medical community has come to a consensus on the vaping crisis. Therefore, CRON stock is absorbing an unfair amount of volatility ahead of carefully sourced, peer-reviewed medical facts.
CRON Stock Has an Easy Reprieve
Like arguably most cannabis companies, Cronos focuses on cannabidiol, or CBD. The reason simply has to do with business.
In 2018, both Republicans and Democrats came together in a rare act of bipartisanship and signed into the law the farm bill. For cannabis firms, this bill had significant implications because it legalized hemp.
Typically, many manufacturers derive CBD from hemp. With the 2018 farm bill, this process is now legal because hemp cannot contain more than 0.3% THC. Thus, CBD-based products feature many of the therapeutic benefits of marijuana (which contains a large amount of THC) without the associated high.
As a result, CBD products have ramped up in popularity. Today, you’ll find incredible product diversity, ranging from vaping oils, edibles, tinctures and topical ointments. So long as Canadian cannabis firms like CRON push CBD, they have greater U.S. market penetration potential.
This is a long way of saying that the public may not appreciate the nuanced differences between CBD and marijuana. Once they do, I anticipate a good chunk of the negativity toward Cronos Group stock to fade.
To be fair, Cronos markets its Spinach brand of THC-based vaping products. But as I mentioned above, we really don’t know what’s truly causing the vaping crisis. My suspicion is that people are illegally modifying their vaporizers. But until we get the facts, it’s premature to completely dump CRON stock on speculation alone.
Context Is Necessary
Part of the reason why as an immigrant I decided to become a U.S. citizen is personal freedom: I enjoy being able to do what I want without the government dictating every step to me.
We could use a dose of that reality right now. Personally, I don’t care about the vaping crisis: I don’t participate in the habit, nor do I intend to. What I care about is contesting the broader concept of the government limiting what free citizens can do with their bodies.
Is vaping an unhealthy and potentially dangerous practice? In all honesty, it very well might be. Clearly, Mother Nature intended us to breathe only oxygen. Anything else, and you run the risk of complications.
But I don’t have the right to tell my fellow Americans what they can or cannot breathe. Similarly, I don’t see the same uproar against McDonald’s (NYSE:MCD) for marketing enticing junk food to our children, who later grow up to have severe obesity and health issues.
In part, freedom involves the ability to make bad choices and to bear the responsibility of them. Admittedly, it may take some time for regular, non-vaping folks to realize this. But once they do, I believe this panic will fade. And that should ultimately benefit CRON stock.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.