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Vaping lung illnesses, threat of regulation hit LI company's stock

Long Island hospitals have reported at least 19

Long Island hospitals have reported at least 19 cases of lung illnesses suspected to be connected to the use of vaping products containing nicotine or THC. Credit: AP/Robert F. Bukaty

Standard Diversified Inc., a Mineola company whose holdings include a maker of vaping products, has seen its stock plummet more than 40 percent in two months amid reports of lung damage linked to e-cigarettes and moves to ban non-tobacco aerosol flavors.

The Mineola holding company’s market capitalization has shrunk by about $40 million in the last week alone, to about $211 million.

Stefanie Miller, co-founder of Sandhill Strategy, a Washington-based research and consulting firm, said vaping companies across the board are facing pressures.

“It’s definitely taking a toll on the value of these companies,” she said.

Long Island hospitals have reported at least 19 cases of lung illnesses suspected to be connected to the use of vaping products.

Six deaths believed linked to vaping have been reported nationwide this year.

Standard Diversified, Long Island’s 16th-largest company based on 2018 revenue of $365.8 million, has three business lines: Standard Outdoor, a billboard advertising company; Pillar General, an insurance company, and a 50.3 percent stake in Turning Point Brands Inc., a publicly traded maker of snuff, Zig-Zag rolling paper, chewing and pipe tobacco and several brands of vaping products.

A Standard Diversified spokesman said the company would have no comment. Turning Point Brands, based in Louisville, Kentucky, did not respond.

Greg Baxter, Standard Diversified’s interim chief executive and executive chairman of the board, also served as a director of Turning Point Brands.

In the quarter ended June 30, Standard Diversified’s vaping revenue, classified under “newgen products,” totaled $41.8 million, about 40 percent of total revenue of $101.8 million.

For the year ended Dec. 31, the company posted a 28 percent revenue increase to $365.8 million, but a 77.1 percent decrease in net income to $2.4 million.

Turning Point’s vaping products are distributed to retail outlets and individual consumers under the VaporBeast, Vapor Shark, Vapor Supply, Vapor World, VaporFI and IVG brands.

Investigators at the Centers for Disease Control and Prevention and state and local authorities have been seeking to identify a common thread to help them treat and prevent the pulmonary illnesses.

On Sunday, Gov. Andrew M. Cuomo announced that New York will ban the sale of flavored electronic cigarettes beginning next month.

Cuomo and other officials have targeted vaping pods with flavors such as cotton candy, which they say can lure teenagers and young adults to toward an addictive product.

The website of Turning Point’s VaporBeast brand offers e-cigarette liquids containing nicotine with flavors such as “blue slushie” and “strange fruit frooty booty.”

The website also calls on visitors to send President Donald Trump an industry group’s form letter urging him not to implement a ban on flavored vaping products because teenagers already are barred by law from purchasing such devices and adults need them to help kick their cigarette habit.

Vape pens, or e-cigarettes, are the battery-powered devices that turn liquids containing nicotine, CBD or THC into an aerosol that can be inhaled. CBD is a compound derived from cannabis plants that is not psychoactive like THC, but is reputed to provide relief from pain and anxiety.

Standard Diversified staged an initial public offering at $10 per share on May 11, 2016.

The value of Turning Point’s stock has been cut in half from $52.74 on July 16 to $24.99 at Monday’s close.

In the same period, Standard Diversified’s stock has fallen from $20.64 to $11.65 at Monday’s closing, a 44 percent decline.

Sourya Das Gupta, a senior research analyst at Mordor Intelligence, in Hyderadad, India, said in an email that regulatory authorities have been behind the curve in overseeing e-cigarettes.

“There are many cases currently where the production of most e-cigarettes goes unregulated,” he said. “The regulatory bodies do not have full control over the manufacturers ... making it hard to ensure that [they] meet a certain standard.”

Governmental bans on e-cigarettes “are expected to hinder market growth,” he said.

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