Cashed-Up Psychedelic Stocks Well Prepared For Adverse Market Conditions

TM Editors Note: This article discusses one or more penny stocks and/or microcaps. Such stocks are readily manipulated; do your own careful due diligence.

MindMed Inc (CAN: MMED / US: MMEDF), one of the industry leaders in the emerging psychedelics space, has had a tough run in the market.

Since closing at CAD$5.31 on February 16th, MMED has dropped by over one-third. It’s down nearly 50% from its 52-week high in December.

On March 30th, MindMed released its year-end results as anxious shareholders looked on. Its full results will be discussed in an earnings call on April 1st.

The financial highlights:

  • Total assets of UD$85.6 million
  • Current cash balance: US$161 million
  • Net loss of US$35.1 million
  • Total cash burn of US$24.2 million

The stock closed down a further 4.64%. Even after a huge 21% bounce the following day, MindMed’s market cap has slipped to ~US$900 million.

Sell MindMed?

Time for investors to fold the tent? Abandon ship?

Look closer.

Total cash of US$161 million. An annual burn rate of US$24.2 million.

Factor that out and (at the current burn rate) MindMed is financed for approximately seven years of additional operations.

Obviously, MindMed’s burn rate will increase as it advances the R&D in its impressive drug pipeline. But even taking that into account, MindMed’s current cash balance represents a financial cushion that can sustain the company for several years, without needing to return to the market for additional capital.

For small cap companies in need of financing, a serious trough in the share price can represent a financial crisis. Either the company goes out and raises capital – on highly dilutive terms – or it is forced to scale back operations.

Neither of those options is appealing either to public companies or their shareholders.

Conversely, for a small cap company with a robust corporate treasury, a plunge in the share price is a severe annoyance, and possibly an embarrassment for management. But it’s not a crisis.

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Disclosure: The writer holds shares of MindMed Inc and Mind Cure Health. Mind Cure Health is a client of Psychedelic Stock Watch.

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