Atai To Upsize IPO Financing To $246 Million, The Industry Leader Just Got Bigger

  • Atai is said to be seeking an IPO valuation of $2.3 billion
  • With a post-IPO cash position of ~$500 million, atai’s market cap could quickly scale higher
  • Other psychedelic stocks should also rise with this new tide

There was news from atai Life Sciences on Friday. No, not an announcement of a trading date for its IPO. But perhaps something equally exciting.

Atai has re-filed with the SEC for its IPO financing. The reason: it is upsizing its IPO from the original $100 million in its first filing up to $246 million.

An even bigger industry leader is about to emerge in psychedelics

Atai was already projected to become the new industry among public companies in the psychedelics space. With its original IPO plans, expectations were for an initial valuation between $1 - $2 billion.

With atai’s revised IPO filing, the company is now targeting a valuation of $2.3 billion. However, expect that figure to be bid up sharply when atai commences trading.

Post-IPO financing, atai should be sitting with a total capital base of roughly $500 million. That would give it capital resources nearly equal to the combined cash totals for the other public players in this industry.

With now 10 research partners in its big-tent drug development model, that is a lot of capital to deploy in advancing the operations of its partners.

One industry observer with a very informed (if not impartial) perspective on atai Life Sciences is Yaron Conforti, CEO of Novamind Inc (CAN:NM / US:NVMDF).

Novamind is also one of the industry leaders in psychedelics, in clinic operations. Its Cedar Psychiatry Network of mental health clinics reported revenues of CAD$1.85 million in its most recent quarter – up 43% quarter-over-quarter. And that network is about to double in size, from 4 to 8 locations.

Novamind is also a strategic investor in atai. Its relationship with atai goes back to 2019, so Conforti is very familiar with atai’s operations.

Speaking with Psychedelic Stock Watch on Friday, he pointed to atai’s status as “the leading steward of capital” for this emerging industry. Conforti is a strong believer in atai’s business model and greatly looking forward to it commencing public trading.

Atai’s operations are important to Novamind (for obvious reasons), including the fact that Novamind is a potential research partner for atai as it seeks out sites for its drug development clinical trials.

But atai’s increased prominence is important to everyone in the industry.

We need look no further than trading in the market on Friday – on news of atai’s upsized IPO financing. All of the five largest public companies in this sector were up on the day.

Compass Pathways (US:CMPS) rose for the 5th day in a row, as its own shareholders appear to be enthused by atai’s approaching IPO date. Atai still retains a >20% interest in CMPS.

MindMed Inc US:MNMD / CAN:MMED), another industry leader and perhaps the closest parallel to atai among public companies, jumped 8.29% Friday.

How the atai IPO is a boost for the sector

Why is the imminent IPO for atai Life Sciences producing a positive spill-over effect in the sector? Psychedelic Stock Watch has covered this, on more than one occasion.

Going back to the IPO for Compass Pathways itself in September 2020, the size of Compass’ own IPO financing ($146 million) and the first NASDAQ listing for a public psychedelics company were important milestones for the sector.

It led to a torrid rally among most psychedelic stocks last fall.

Atai’s IPO won’t be merely the 3rd NASDAQ-listed psychedelic stock (MindMed was recently uplisted itself). This is because, with all deference to CMPS’s exciting lead R&D program, atai simply brings much more to the table.

Atai is more than “the leading steward of capital” in this emerging industry. It also offers the greatest depth in operations, via its business model of research partnerships with well-positioned private players.

Driving those operations with approximately $500 million in investment capital is simply a much bigger deal than Compass Pathways alone, especially given that atai continues to hold a substantial interest in CMPS.

Atai’s re-filing for its IPO financing likely pushes back its initial trading date on the NASDAQ by a few more weeks. However, for investors in psychedelic stocks who have patiently endured months of sideways trading, it’s probably worth the wait.

By the time the dust settles, atai’s IPO financing could roughly double the impressive total raised by Compass Pathways for its IPO.

That’s more than just symbolic. Drug development (and even clinic operations) are capital-intensive activities.

A bigger industry leader, a bigger sector?

More money = more growth.

It’s a simple equation that investors can wrap their heads around. The emerging psychedelic drug industry has consistently over-achieved in attracting new capital to the sector.

Now the Big Dog is about to flex its financial muscles on the NASDAQ. Investors will notice.

As atai’s market cap is bid upwards in acknowledgement of this financial muscle, other players in this industry become more attractive value propositions.

Not just MindMed. Several public companies also boast advanced psychedelic drug R&D, commencing or about to commence Phase II clinical trials.

These other public companies are also well-capitalized, relative to their current market caps. As the research (and investment) opportunities related to psychedelic drug R&D continue to multiply, there are more than enough drug research opportunities to support a broad base of winners.

Add in the revenue/growth potential from clinic operations and related IP development, and there is plenty of meat on the bone here for the new investors who will be attracted to the psychedelic drug industry based upon the atai IPO.

Not all of them will be able to enter atai (at reasonable price levels). Spill-over is to be expected for other leading pubcos.

With the atai IPO now imminent, it’s easy to forget that the public companies in this emerging industry only began to appear a little over a year ago.

Over that time, the overall industry has raised roughly $1 billion – even prior to atai’s pending IPO financing. A magnet for capital.

And a magnet for high-profile investors: Peter Thiel, Kevin O’Leary, Bob Parsons, Mike Novogratz and many others.

For Yaron Conforti, atai’s pending IPO is nothing less than the sector itself stepping up to a new level of prominence. That will be music to the ears of investors in psychedelic stocks.

DISCLOSURE: The writer holds shares in MindMed Inc and Novamind Inc.
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