MMED_ATAI (cover) by Jackie is licensed under
MindMed Inc rose 23.64% on one of its heaviest trading days (nearly 25 million shares for MMED and MMEDF)
There is a huge amount of new buzz in the psychedelics space after private kingmaker, ATAI Life Sciences expressed its intention to go public in the spring of 2021.
Monday, ATAI announced closing on $125 million in its Series C financing round.
Monday, MindMed Inc (CAN:MMED / US:MMEDF / GER:MMQ) jumped over 25% to a new all-time high of CAD$2.13, closing at $2.04. One of the top five days in total trading volume since MindMed went public.
Coincidence?
No. And here’s why.
ATAI Life Sciences IPO will be bigger than Compass Pathways
Market reports are that ATAI will be seeking an IPO valuation of $1 - $2 billion. But even without such speculation, astute investors would be expecting ATAI to go public toward the upper end of that range.
We simply need look at Compass Pathways (US:CMPS) itself.
Compass became the first psychedelics unicorn at the close of its IPO financing. It has a current market cap of $1.2 billion. At its high ($47.30 per share), it had a market cap in excess of $1.6 billion.
There are important reasons to expect ATAI to trade at a premium to CMPS.
- ATAI holds a significant percentage of Compass (22%), but Compass is only one R&D platform among ATAI’s big tent of psychedelic drug R&D partnerships.
- After ATAI’s Series C financing, ATAI has already raised nearly as much as Compass has in total. But $146 million of CMPS’s funding came with its IPO.
- With a much greater news flow than Compass, ATAI can be expected to trade closer to full value much more of the time.
Psychedelic Stock Watch was touting ATAI’s potential back in September.
Compass Pathways raised $146 million for its IPO. How much cash will investors be throwing at ATAI, as the mainstream media stokes investor sentiment to enter psychedelic stocks?
Peter Thiel backs Berlin start-up making psychedelics in $125 million round (CNBC, November 23rd)
Psychedelic Drugs Are Fueling A Mental Health Revolution (Bloomberg, November 23rd)
Psychedelic Drugs Are Fueling A Mental Health Revolution (Bloomberg, November 23rd)
Interested in buying into ATAI? There is pressure to get in right at the IPO.
Why? Think about it.
Few entry windows for ATAI?
There was a huge amount of excitement for the Compass Pathways IPO. Within the first week of trading, CMPS had already ran from its initial price of $17 as high as $47.30.
However, with only a single R&D initiative that is really at the headlines stage, there has been limited news flow to drive the share price. CMPS stock has drifted lower and in recent weeks bargain-hunters have been able to scoop up shares as cheap as $32.
ATAI, however, is a big-tent psychedelic drug R&D powerhouse. Currently with nine research partners (including Compass), investors can expect a much stronger news flow to drive the stock.
Less gaps between news mean less dips due to exits by fast money and/or weak hands. It will also make short-sellers more wary.
Shorting ATAI ahead of a significant news release – with the psychedelics space as hot as it is – would be a good way to turn a large stack of cash into a small stack of cash.
In short, we may very well see ATAI run up even faster/stronger off of its IPO than Compass. And once public, we should expect ATAI to trade closer to full value most of the time, especially being the new industry leader.
ATAI’s Spring 2021 IPO is driving MindMed trading today
Why should investors connect a sudden jump in MindMed stock (on very heavy volume) with excitement over the upcoming ATAI Life Sciences IPO?
Let’s suppose you’re a forward-thinking investor who has just projected the likely trading pattern with ATAI stock after it goes public.
You’re very interested in taking a position. You like the big-tent ATAI business model. It offers a multitude of potential R&D winners, thus adding upside potential and diversifying risk.
But you’re not prepared to ridiculously overpay to elbow your way in.
What is the alternative? MindMed Inc.
MindMed is the other “big tent” business model in the psychedelic drug industry. The difference is that all of MindMed’s R&D is proprietary, subject to its partnership with the University of Basel (Switzerland).
Two other differences with MMED?
- It’s already public
- It has a relatively large float (350+ million shares)
You want to enter ATAI. But you’re not sure that you will be able to purchase a block of shares at an attractive price.
MindMed is the obvious alternative to ATAI Life Sciences
Call it an “insurance policy”. Call it the “second choice” of many investors in psychedelic stocks.
The management of MindMed (and its existing shareholders) don’t care what you call it – as long as investors keep piling into the stock.
Media coverage of psychedelics stocks is highly favorable and steadily amping-up in frequency.
The Mental Health Crisis was already an enormous driver for investing in the psychedelic drug industry. But the COVID-19 pandemic is rapidly/dramatically increasing the severity of this Crisis – and the need for psychedelic drug medicines.
Huge flows of capital are entering the industry.
Big-name investors are tripping over each other as they race to take substantial positions in these companies.
Want to bet that MindMed Inc and (soon) ATAI Life Sciences will do very well in this environment? That’s what investors were doing on Monday.
DISCLOSURE: The writer holds shares in MindMed Inc.
