Déjà Vu: 2021 Slump In Psychedelic Stocks Mirrors 2020

TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

Psychedelic drug stocks have spent the first 3 ½ months of 2021 in a bear market. Not only have share prices retreated, but trading volumes have dropped off dramatically for most of these companies.

It’s beginning to look a lot like…2020.

No, not the last 3 ½ months of 2020 after the Compass Pathways (US: CMPS) IPO, when psychedelic drug stocks went on a tear – including a couple of ten-baggers.

The 2 ½ months before that: from the beginning of July until mid-September.

The 2020 slump in psychedelic stocks

From roughly the first of July until the Compass Pathways IPO (mid-September), MindMed Inc (CAN: MMED / US: MMEDF) was dead stock. Absolutely flat price action. Near-zero trading volume.

While there were only a handful of other public companies trading at that time, their stocks showed a similar collapse in trading volume over that same period.

In technical terms, did MMED look like a stock that any investor would want to buy in early September 2020? No.

Then the Compass IPO arrived.

The share price soared. Trading volumes ignited. At its 2020 high, MMED was a 15-bagger from where it was trading immediately prior to the CMPS IPO.

Night and day.

The 2021 slump in psychedelic stocks

Flash forward to today. Since MMED closed at its recent high of CAD$5.31 on February 16, 2021 (just over two months ago), MMED has dropped by over 40%.

In relative terms, trading volume has once again slipped to near-zero. Déjà vu.

Are there any reasons for this dismal stock performance? Nothing really that is directly connected to the sector.

U.S. tech stocks have corrected in early 2021. Small caps have seen disproportionate selling. Media coverage of psychedelic stocks dropped off in early 2021 – as we saw saturation coverage of anything/everything related to COVID-19 vaccines.

In technical terms, does MMED look like a stock that any investor would want to own today? No. But tell that to the Smart Money.

Institutional investors bought over CAD$90 million of MMED stock at CAD$4.40 – over 40% above today’s share price.

That was in a financing that closed on January 7, 2021. It was part of the US$500+ million that was pumped into the sector in ~3 months following the CMPS IPO.

With the 2021 slump in psychedelic drug stocks, is Smart Money having second thoughts about investing in this sector?

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

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