Mind Cure has just closed on an oversubscribed private placement totaling CAD$3.6 million
Mind Cure is well-positioned in the second tier of public psychedelics companies
Success for a junior public company is a function of two factors: strong performance in operations and prowess in capital markets.
It takes money to grow.
As investors survey psychedelic stocks for investment opportunities this is where their due diligence needs to focus. How strong is a company’s business model? Is it capitalized well enough to execute on that model?
Two tiers of psychedelic stocks by capitalization
With public companies in the psychedelics space, two tiers of capitalization have emerged.
In the top tier is Compass Pathways (US:CMPS). The industry leader raised over $146 million in its IPO financing alone.
Behind Compass is MindMed Inc (CAN:MMED / US:MMEDF / GER:MMQ). MindMed has now raised roughly CAD$75 million, including $28.75 million in its recent, oversubscribed placement. The new entrant to this top tier is Cybin Corp (CAN:CYBN), who just announced the largest single Canadian psychedelics financing (CAD$45 million).
But with this greater financial clout comes much larger market caps, especially for CMPS ($1.2 billion) and MMED (CAD$400 million).
This means more aggressive investors may be more interested in the second tier of psychedelic drug companies. These are companies that have demonstrated the capacity to successfully raise capital (on a smaller scale), but sit with generally much smaller market caps.
In this next tier of public companies Mind Cure Health (CAN:MCUR / US:MCURF) offers a very interesting value proposition for investors.
Mind Cure well-positioned in second tier
Behind the top-three psychedelic stocks (by capitalization), four other public psychedelics companies have shown success in capital markets to complement their operational developments.
After a large, recent run-up in share price, Field Trip Health (CAN:FTRP / US:FTRPF) sits with a very robust market cap of CAD$178 million.
Numinus Wellness (CAN:NUMI / US:LKYSF) has also been one of the better performers among psychedelic stocks over the past two months. This has taken its market cap above CAD$50 million.
Pure Extracts Corp (CAN:PULL) just commenced trading on November 5th. Over that time, it’s market cap has remained in a consistent range between CAD$40 - $45 million.
What about Mind Cure?
MCUR commenced trading immediately after Compass Pathways in September, initially priced at CAD$0.20. Surging as high as CAD$0.90, Mind Cure was actually the best-performing psychedelic stock in the rally sparked by the Compass IPO.
Since that time, Mind Cure has given back some ground and was trading in the CAD$0.60 - $0.70 range – at the time it announced a new financing on November 13th.
Units in the financing were priced at CAD$0.45. Most financings among public companies have been at similar discounts.
After that announcement, MCUR stock has done what stocks typically do immediately after a new financing: drifted toward the unit price of the financing.
Such weakness in share price is a bitter pill for existing shareholders. But it’s a part of life for junior public companies – in almost any sector.
For new investors, however, these post-financing dips can be very attractive buying opportunities.
Mind Cure priced at a discount after latest financing?
Refer again to the graphic above. Emerging public companies in the psychedelics space are tending to trade at multiples of at least 4 – 5 times total capital raised. Field Trip is trading at a significantly larger multiple.
Mind Cure’s multiple after its recent dip? Roughly 3:1.
Where would Mind Cure be trading at a 5:1 multiple (factoring in the additional shares)? Right back at CAD$0.70.
That’s a nifty 32% premium to the current share price.
Over the short term, markets misprice assets. That’s how investors make money.
Stocks often get overvalued from investor exuberance over some major news – a great time to sell. Similarly, after a financing (and the dilution that comes with it) the market often punishes pubcos by discounting their share price.
For one brief interval last week, Mind Cure was trading below CAD$0.50. That’s when the bargain hunters started moving in.
Mind Cure is cashed up. Mind Cure looks relatively cheap versus its peers.
A buying opportunity for investors.
DISCLOSURE: Mind Cure Health is a client of Psychedelic Stock Watch. The writer holds shares in Mind Cure Health.