This morning, ATAI Life Sciences (Nasdaq: ATAI) experienced a shocking drop of nearly 40% in its stock price, plummeting to an all-time low since the company's June 2021 Initial Public Offering. The cause? A failed lead asset from its majority-owned Perception Neuroscience unit.
In the first week of September 2022, I issued a warning about Cathie Wood’s lackluster performance as a money manager in suboptimal market conditions. Four months later, it’s the same tale and old woes as psychedelic company ATAI fails its Phase 2A Trial.
Investing in the stock market is a fancy euphemism for gambling. But unlike traditional brick-and-mortar joints with slots, craps, and blackjack, the Crazy Capitalist Casino allows you to bet on the house – and the house always wins. How can the average retail investor adopt a healthy risk-and-reward mindset? Math Over Myth!
Math Over Myth removes the romance and mythology from investing to focus strictly on price movements, mathematics, and technical analysis. Regardless of the long term value and growth prospects of medicinal psychedelics writ large, the public market space is still very young and volatile. While fundamentals aren’t entirely irrelevant, adopting a savvy gambler mentality requires a healthy dose of nihilism in this department.
Atai Life Sciences
Shares of ATAI Life Sciences (Nasdaq: ATAI) sank nearly 40% this morning, hitting another all time low since its June 2021 IPO, after the clinical-stage psychedelic biotech pharmaceutical company announced the lead asset of its majority-owned Perception Neuroscience unit failed. ATAI’s stock is now down approximately 92% from its IPO-day high of S22.91 and also down about 72% year over year.
Here’s some of my analysis from September 7th, 2022:
Wood’s notoriety as an active fund manager brings attention and awareness to a mainstream audience, not to mention injects liquid demand into the respective stocks. However, Wood’s success as an investor is directly tied to a breakout bull market that began in March of 2013 (eclipsing the markets’ pre-Great Recession all time highs from late 2007) and ran until February of 2021. Since ARKG topped out with the broader markets in early 2021, Wood’s Genomic Revolution ETF is down a staggering 70.44% (as of market close September 6, 2022), essentially erasing any gains the ETF made during the COVID stock market bubble.
Moreover, ARKG made a strategic misstep by opening its position in ATAI when the bears were still firmly in control of the price action. The stock is currently down 31.43% since ARKG’s initial three day buying spree —ending February 10, 2022. Granted, the bulk of ARKG’s position in ATAI has been averaging down since the initial accumulation, but it raises serious questions as to why bother trying to catch a falling dagger in the first place?
Utilizing the AdvisorShares Psychedelics ETF (NYSEARCA: PSIL) as the sector’s benchmark, the psychedelic space writ large is presently experiencing a correction, which also drags on atai's already deteriorating technicals.
Moreover, I asserted in a September 9, 2022 follow-up piece that:
According to the chart’s technicals, ATAI was never a buy, and it still isn’t. Investing like a professional isn’t difficult, it just requires discipline not succumbing to FOMO and hype, as well as a bit of knowledge about price movements, market momentum, and how to read a stock chart with moving averages.
In 2020 and 2021, ATAI spent almost $60M total on R&D. However, executive compensation for their top three executives exceeded $15.4M in 2020, 36% more than 2020’s R&D spend. In 2021 CEO Florian Brand earned 26.5M+ in total compensation. That’s quite the outsized pay day for the CEO of a company whose stock was in a free fall, erasing shareholder value for those who bought the IPO, while company insiders made a handsome profit on IPO day. Despite my focus on technical analysis, this fundamental imbalance is concerning and raises even more serious red flags.
Cathie Wood & ARK Invest
Cathie Wood’s ARK Invest ETFs are heavily invested in three sectors that were brutally punished over the past year: Tesla (EV), Bitcoin (Cryptocurrency), and Psychedelics. In any of these situations, relying on technical analysis instead of belief is a much healthier approach to gambling in the stock market. One of the cardinal rules of technical analysis is never try to catch a falling dagger, since bottoms are only formed in hindsight. It’s a discipline. A discipline which, much like CNBC’s Jim Cramer, Cathie Wood lacks.
Finally, there’s an ugly underbelly and seething hypocrisy to the specific psychedelic companies Wood’s ARKG is actually buying. Both CMPS and ATAI are bankrolled by fascist billionaire Peter Thiel, and both have earned strong reputations for being the largest patent trolls in the sector. Thiel’s guiding theory in any business venture is to corner and monopolize the market, which CMPS and ATAI are attempting to do by using intellectual property laws to stifle future innovation and competition in the space.
Companies like CMPS and ATAI don’t want full legalization of psychedelics. They want to market, create artificial scarcity, drive up prices, and corner you into purchasing their patented versions of organic compounds which have thrived on Earth since ancient times.
We tend to reflexively view intellectual property as a positive without considering ethics and resulting harms of the practice itself. As opposed to a natural property right, IP is artificial, creates scarcity rather than managing it, and acts as a state subsidy to incumbent corporate interests. IP distorts markets and infringes on the concept of real property rights, forcibly transferring wealth upwards with mostly negative impacts on segments of global economies. Moreover, the myth of IP as a supposed necessity for profit incentive has been thoroughly debunked.
Better yet, with so many medicinal psychedelic companies out there, why is Cathie Wood and her ARK Genomic Revolution ETF focused on two toxic, patent trolling outfits financially backed by an unrepentant fascist, representing one of the most dangerous threats to both our personal data and democracy?
There are no mythical Puff the Magic Dragon or fabled Unicorn stocks that are a panacea to all your money goals. Regardless of what people tell themselves, nothing about playing the stock market involves pride or ego, it’s just about money. The more educated an investor, the more information they have to determine a risk-reward scenario which reconciles to their investment horizons and cash management. Individual stock picking is largely a fool’s errand sucker bet, which makes people seem smart in good times, when it’s actually just fortunate timing and luck. Protect your neck. Gamble responsibly.
Craig D. Schlesinger is an Advisor to PSYC Corp & Spotlight Media CEO David Flores, and a market analyst with over twenty years experience predicting price movements and trend reversals in various sectors. Follow his #MathOverMyth technical analysis and him on Twitter: @mathovermyth
Craig holds no positions in ATAI, ARKK, ARKG, CMPS, or PSIL.