- After a very quiet summer, psychedelic drug stocks have erupted
- Electrifying gains have been accompanied by huge trading volumes
- The number of winners is growing – as investing profits multiply
For a while, it didn’t look like it was going to happen.
Psychedelic stocks were dormant for a period of several months this year. Share prices were retreating. Trading volumes were extremely anemic.
Then, suddenly, the sector took off.
Psychedelic drug stocks have since erupted. Share prices have soared and trading volumes for many stocks have been off the charts over the past three months.
What happened? We can summarize 2020 for psychedelic stocks in the following manner.
- False start
- A Big Scare
- Skeptical markets
- The Game-Changer
- The bull market begins
In early 2020, the psychedelic drug industry came into existence – in terms of publicly-traded companies.
Via RTOs and IPOs, several new companies were launched. Several other smaller companies (mostly cannabis companies) either added a psychedelics component to their business model, or simply changed direction into psychedelic drugs.
Among the prominent early names to make their debut were MindMed Inc (CAN:MMED / US:MMEDF), Champignon Brands (CAN:SHRM / US:SHRMF) and Numinus Wellness (CAN:NUMI / US:LKYSF).
MindMed traded solidly higher in initial weeks, but it was Champignon Brands that really took off. After closing at CAD$0.22 on March 2nd, SHRM started surging higher – on heavy volume. By mid-May it had traded up to CAD$2.38.
Shortly after that, Numinus also commenced trading. NUMI exploded from its initial trading price (CAD$0.25) to an intraday high CAD$1.50 – before closing at CAD$1.03 on its first day of trading.
But that early rally was destined not to last.
Call it “a false start”. Only a few companies were trading publicly. Little capital was flowing into public markets (yet). And existing companies were still laying the foundations for their psychedelics operations.
Then disaster struck.
A Big Scare
On June 22nd, Champignon Brands issued the following release.
The BC Securities Commission had uncovered significant deficiencies in Champignon’s disclosures regarding its recent acquisitions.
Trading in SHRM was suspended on the Canadian Securities Exchange, pending a thorough review and a satisfactory correction of the deficiencies in disclosures. It remains suspended as of the present time.
Public companies do make such mistakes – generally smaller/newer public companies.
It was only one public company that was guilty of such an infraction. But Champignon Brands was (at the time) the industry leader, in a space where there were only a handful of companies.
For that reason, it was the worst company to make such a mistake. And it couldn’t have come at a worse time for this emerging industry.
Share prices immediately started to sag. More importantly, trading volumes collapsed.
Investors had gone into wait-and-see mode with respect to the psychedelic drug industry.
After being initially very receptive toward psychedelic stocks, investors were now understandably wary.
Would more companies be found to have disclosure deficiencies? How would this affect capital-raising – in a capital-intensive industry?
Mydecine Innovations Group (formerly New Leaf Brands) (CAN:MYCO / US:MYCOF) had also made a nice run after rebranding itself as a psychedelic drug company. But after peaking in early June, it too suffered a long slide.
Markets are all about confidence and momentum. The former drives the latter.
Champignon Brands had (temporarily) shattered confidence. All the early momentum for psychedelic drug companies was gone.
It was now a new industry seriously in need of a catalyst. Enter Compass Pathways (US:CMPS).
On August 31, 2020; Compass Pathways filed its application for a NASDAQ listing. It confirmed months of speculation that Compass was preparing to go public.
On September 18, 2020; CMPS commenced public trading. Compass ultimately raised $146.6 million for its IPO financing and quickly soared from its initial trading price of $17 past $40 per share.
The IPO filing got the market’s attention: the rocket was on the launching pad. When Compass commenced trading, that was the fuse that lit the rocket.
The bull market begins
Compass didn’t lift off alone.
Virtually every company with operations in the psychedelics space got a bounce. Companies like MindMed and (new IPO) Mind Cure Health (CAN:MCUR / US:MCURF) didn’t simply match the performance of CMPS. They quickly surpassed it.
While Compass gave back some of its early gains, MindMed quickly doubled – and has never looked back.
Mind Cure ran from its initial trading price of CAD$0.20 on September 21st all the way to CAD$0.72 at the end of its first week of trading. A tidy profit of 260%.
Since that time, the rally in psychedelic drug stocks has steadily broadened. Here are the leading companies that have been generating these substantial investor profits.
With each new wave of the rally, more companies have begun to participate. Even more important, trading volumes for these companies have grown exponentially.
Numinus traded over 30% of its entire public float in a single trading session. MindMed is often registering trading volumes of 10+ million shares in both Canadian and U.S. trading.
A classic bull-market feeding frenzy.
Big names and big dollars drive bull market
It certainly hasn’t hurt the industry to see a large-and-growing list of high-profile investors aggressively positioning themselves in this sector.
Peter Thiel, Kevin O’Leary, Bob Parsons, Mike Novogratz, Tim Ferris and Bruce Linton are just some of the big players who have been placing large bets on the future success of this industry.
Not surprisingly, investment capital has been following these market icons into the psychedelics industry – lots and lots of investment capital.
Over $500 million in fresh capital has been injected into the psychedelic drug industry over roughly the last six months. But $400+ million of that capital has flooded into the sector in just the last three months – since the Compass IPO.
Money drives markets.
It’s no secret that massive infusions of central bank funny-money have been pumping up stock valuations in the broader markets. The powerful rally in psychedelic drug stocks has been created the old-fashioned way: real investment capital.
Long-term investing opportunity
Gamblers in NASDAQ tech darlings live in constant fear of the bottom falling out from under their grossly over-priced bets. Meanwhile, psychedelic stock investors sit confidently – waiting for the next big infusion of investing capital to drive the next leg of this bull market.
Psychedelic drug stocks are proof that you don’t have to blindly gamble on over-priced large caps to make money in markets.
And the industry is for real.
The Psychedelic Drug Revolution is the answer for a Mental Health Crisis that afflicts over 1 billion people around the world. Numerous multi-billion-dollar treatment markets are wide open – as the existing standard of care is nothing short of atrocious.
Gamble in bubble-stocks? Or invest in a Revolution?
As investors become more educated about psychedelic drugs and the psychedelic drug industry, that choice gets easier and easier.
Short-term buying opportunity
After huge recent runs, psychedelic stocks have corrected this week. While current share prices (above) still represent spectacular returns, several of these stocks have pulled back significantly.
MindMed is currently 36% below its high from last week.
Mind Cure is 32% below last week’s high.
Numinus is off 27% from last week’s high.
For investors who thought that they might have missed their flight with some of these high-flying psychedelic stocks, the market has presented you with a second-chance opportunity.
Psychedelic stocks have been one of the great market stories in 2020. The next chapter is about to begin.
DISCLOSURE: The writer holds shares in MindMed Inc, Numinus Wellness, Cybin Corp and Mind Cure Health. Mind Cure Health is a client of Psychedelic Stock Watch.
Published at Thu, 17 Dec 2020 05:00:05 +0000