Top Cannabis Consumption Formats in 2019

Source: BDS Analytics

Both the Equipment and the Extract May be Dangerous

Nothing has been confirmed by the industry or the government, but a theory put forward by a consulting firm out of Colorado is that toxic metals in the vape cartridge itself may be partially to blame for the illnesses.

Symptoms of metal poisoning are very similar to the symptoms seen by the vaping victims.

Some black market vape pens are known to contain cadmium on the heating elements which can be breathed in during use.

Cadmium is extremely toxic.

Though cadmium poisoning is a more immediate problem, black market cannabis extract has also been shown to contain banned pesticides that are also toxic when inhaled, but do not have such an immediate effect on the body.

Smoking pesticides will do long-term damage, while smoking heavy metals will put you in the emergency room in days.

We think when all is said and done, unregulated cannabis oil and vape hardware will be the proven source of the vaping epidemic, largely vindicating the legal market.


The Legal Market Failed to Publicize its Greatest Advantage

So far it looks like the national news media has done in one month what the legal cannabis market could not in five years, convince the public that black market products are significantly worse for your health than legal options.

In modern history Cannabis was exclusively sold on the black market and with only five years of legal sales so far, old consumer habits die hard.

Black market growers have been using banned pesticides and chemicals all along, but only with the advent of regulations, legal testing, and better information, can we confirm how much safer legalized cannabis is for us.

We think a huge missed opportunity for the legal companies was to not wage a bigger information campaign against the black market.

Consistently proving dangerous chemicals can be found in many black market products would do wonders to move consumers away from their dealer and to the local dispensary.

The problem so far has been consumers’ focus on price and quality, while ignoring the health impacts.

The legal market can’t compete on price and is still behind in quality some would argue, so its largest advantage is a far cleaner, healthier product.

As the confirming evidence piles up proving the black market is poisoning customers, consumers will finally understand they are saving money in the short term at the expense of their health in the long term.


The Legal Market Was Just Given a Gift

Neither the media nor the Food and Drug Administration (FDA) are specifying which vaping products are to blame.

The media isn’t because they frankly don’t know enough yet to distinguish between all the different types of cannabis and nicotine vapes.

Recent investigative pieces found black market cannabis vapes were the problem as we expected, but the data is not scientific or overwhelming.

The FDA on the other hand is always going to be overly cautious, which explains their warning that consumers stop vaping altogether.

We expect that product testing will eventually show the legal market is safe and the black market is to blame for this outbreak of lung injuries.

Once the FDA confirms what many in the cannabis industry already know, public perception will swing from “vapes are deadly” to “black market vapes are deadly”.

This shift in consumer perception will end up jump starting legal market sales in our opinion.

In the near term, 12-24 months, we think consumers will continue to be wary of vape pens, both the equipment itself and the distillate.

Legal flower will be the big winner in the near term due to the vaping scare. Black market and legal consumers will partially switch to fully tested, unprocessed flower. Over time the new converts from the black market will move from flower back to vapes leading to higher sales and faster sales growth for cannabis concentrates.

Since the news broke, legal vape sales are already down 20%-40% in fully legal states.

We think sales will recover, however growth will now be slower until the industry can prove conclusively that legal vape pens and vaping oils are safe.

Once consumers are thoroughly convinced, the legal market will thrive.

Vapes as a % of Total Cannabis Sales

Vape Share of Rec Cannabis Sales By Week and State

Source: Headset courtesy of


A Guide to the 6 Stages of the Vaping Crisis

  1. Initial flood of hospitalizations and major news coverage begins.
  2. Sales fall as government health agencies begin to investigate and release blanket warnings against consuming any vapeable product, regardless of origin or type of concentrate.
  3. Investigation finds that toxic chemicals/metals in unlicensed vape pen equipment, or banned chemicals in black market vape oil are the culprits. Government press releases and media coverage make it clear the black market is to blame.
  4. State by state vape bans lapse but legal testing gets tougher. Legal vape products can now differentiate themselves better vs the black-market. Consumers more aware of the health risks from buying black market, even if the price is lower. Vape demand is higher than it was before the health scare as black market consumers switch over to the legal market for health reasons.
  5. Public opinion grows for national cannabis legalization to protect consumers. Even anti-cannabis politicians now have political cover to pass federal legalization in the interest of “public safety”.
  6. Vaping continues to grow in popularity as a more portable, healthier and discreet way to consume cannabis.

The Impact on Stocks has Been Severe

Looking at stock price performance from the day the Centers for Disease Control (CDC) began releasing a tally of those effected, we can see the closer a business is to the vape cartridge, the worse the stock performance.

U.S Stock Price Performance During Vaping Crisis

Source: Y Charts

Kushko (OTCMKTS: KSHB), a supplier of ancillary equipment including vape pens and extraction solvents, was hit the hardest, down almost 50% since the news broke.

TILT Holdings (CNSX: TILT) was not far behind, likely due to its reliance on vape equipment sales for a majority of revenue.

Surprisingly, Greenlane Holdings (NASDAQ: GNLN) is only down 22% even though the company derives 50% of revenue from flavoured Juul pods and another big chunk from cannabis vape equipment.

On the flip side is Trulieve (CNSX: TRUL), whose stock is higher than when the vaping crisis first began.

For over two years Trulieve has been selling legal vapeable products in Florida with no problems, likely contributing to investor confidence in the name. Performance of other Florida license holders supports our view.

The fact that the company is one of the few profitable cannabis companies likely helped as well.

The cannabis market is in freefall as a whole, however we think the stocks hits hardest by the vaping crisis will likely bounce back the most once the selling subsides, the government confirms the legal market is not the problem and sales rebound.

Kushko and Greenlane would be the preferred ways to play a rebound in vaping sales.

Kushko in particular raised cash a few weeks ago, giving the company about a year of cash runway and the ability to buy distressed vaping assets if they choose.

Tilt on the other hand has cash concerns to go with the vaping sales hit, keeping us on the sidelines until they raise more money.

Vaping Illnesses by State

Source: CDC

Where Does the Industry Go From Here

Dispensary education is going to be the first line of defense and it needs to be front and centre.

We think the vape epidemic will turn out to be a gift for the legal cannabis industry.

They just need to make sure to capitalize on it.

Now consumers are reminded daily of the true cost of buying from the black market.

Yes the products are cheaper and may be of equal or higher quality, but the potential risks you are taking with your health will never justify the savings.

The cannabis industry needs to band together to push hard on public education and legal verification.

The ban on cannabis commercials will make it hard to reach every black-market consumer for now.

Dispensary education is going to be the first line of defense and it needs to be front and centre.

The legal market also needs a hard-to-counterfeit way for consumers to verify their product is safe and legitimate.

Seals showing the product has been tested and database driven serial numbers are a start.

At the end of the day, legal weed has been proven time and again to be far safer than black-market alternatives.

If the industry doesn’t take consumer education seriously, black-market health scares will continue to dent the industry’s reputation and legal sales with it.

The growth of the entire industry is at stake.

About Author

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.