The psychedelics space is heating up.
Compass Pathways (US:CMPS) got the ball rolling with its IPO announcement. It began trading last week and has quickly hit a $1 billion market cap – even as most of the NASDAQ pulls back.
We saw that coming.
The latest big news in the psychedelics space is the announcement by MindMed Inc (CAN:MMED / US:MMEDF / GER:MMQ) that they are seeking to up-list on the NASDAQ. MMED stock is up over 30% across the last two trading sessions.
Prior to this, it had been a very quiet summer for psychedelics stocks. In fact, several public companies have given back substantial ground.
We’ve already suggested that Compass Pathways going public is a “game-changer” for the psychedelic drug industry. For those who agree, what is the best way to capitalize on what could be a hot fall season for psychedelic stocks?
Obviously there is Compass Pathways itself. But with a $1 billion market cap, it is now the most richly valued psychedelic stock.
MindMed may have also regained momentum – if the last two trading days are any indication.
Or, investors may want to jump on another new pubco. Mind Cure Health (CAN:MCUR) has just made its own IPO debut on the Canadian Securities Exchange (CSE).
However, for investors with a higher risk tolerance who would really like to add some leverage to their psychedelics investments, psychedelic stock warrants are presenting some interesting options.
Warrants provide high-leverage opportunity
MindMed itself has some warrants that are trading publicly (symbol “MMED.WT”). As an example of the leverage provided by warrants, MMED.WT has more than doubled over the past two trading sessions (from CAD$0.045 to $CAD$0.13).
These warrants are currently out of the money (with an exercise price of CAD$0.79). But they are valid until May 26, 2022.
MindMed has already traded as high as CAD$1.00 since going public in March. So it’s very easy to envision MindMed’s publicly traded warrants being back in the money – especially if MindMed is successful with its up-listing application.
Now a new play in psychedelic stock warrants has surfaced. Numinus Wellness (CAN:NUMI / US:LYKSF) has announced that it has listed 9 million of its own warrants for public trading (symbol “NUMI.WT”).
The warrants have an exercise price of CAD$0.35. With NUMI currently trading at CAD$0.225, they are also out of the money.
However, Numinus shot up as high as CAD$1.55 on its IPO debut. Numinus is one of a few public companies that is licensed by Health Canada to research and extract psilocybin.
Numinus’ warrants are currently trading at CAD$0.05. But if the stock comes anywhere close to regaining its previous price level, these warrants are back in the money – and a multi-bagger for warrant holders.
The Mental Health Crisis has amplified the need for new psychedelics-based drug therapies. In the U.S., the number of Americans being treated for depression has tripled as a result of the COVID-19 pandemic.
For investors who are expecting a hot autumn for psychedelic stocks (after a cool summer), psychedelic stock warrants offer a high-leverage opportunity.
DISCLOSURE: The writer holds shares and warrants of MindMed Inc. The writer holds warrants of Numinus Wellness Inc. Mind Cure Health Inc. is a paid client of Psychedelic Stock Watch.
Published at Tue, 22 Sep 2020 06:00:02 +0000