In a Reddit AMA, MindMed CEO Robert Barrow says Nasdaq delisting is not “a risk of any sort.”
As MindMed’s (NASDAQ: MNMD, NEO: MMED) stock has tumbled over the past year —the company is down an astonishing 82% since June 2021— fear of a Nasdaq delisting among retail investors has spread like wildfire.
This fear, however, is apparently not shared by MindMed’s CEO, Robert Barrow. On Thursday, I had the opportunity to hold an AMA —ask me anything— with Mr. Barrow. One question, asked by Reddit user Any_Care9269, pushed Barrow on the plan to prevent MindMed’s stock from delisting from the Nasdaq, given that the stock price is currently under a dollar.
And while Barrow said that he “can’t speak specifically to our plans,” he assured investors that MindMed is monitoring the situation and making contingencies which they will announce “at the appropriate time.” Speaking on the likelihood of MindMed’s stock ever being delisted, he insisted that the leadership “certainly do not view delisting as a risk of any sort.”
While one would expect the CEO to offer reassuring words to its investor regardless of the circumstances, it is nevertheless positive to hear that the company does not view a Nasdaq delisting as a realistic possibility.
As a refresher, the Nasdaq is one of the world’s premier stock exchanges. In order for a company to be listed on it they must meet many requirements, such as a minimum stock price of $4 dollars —though that minimum can drop to as low as $2 in certain circumstances. As MindMed’s stock was going parabolic in early 2021, they met all of the uplisting requirements and were granted access to the exchange. This gave them greater access to investors and the company benefited from a boost in legitimacy.
However, a listing on the Nasdaq is not necessarily permanent. In order to remain on the illustrious exchange, companies must continue to meet certain standards. One such minimum requirement is that their stock price remains above $1 in perpetuity. If a company’s stock falls below this threshold for at least 30 consecutive business days, it will receive a “deficiency notice” from the Nasdaq.
MindMed, whose stock price currently sits at $0.58, received such a notice on May 27th, 2022.
This, however, is not the end of the road. When a company receives a deficiency notice, rather than being booted from the exchange immediately, they are given a 180 calendar day period to regain compliance with the standards. In order to regain compliance, a company’s stock must close at $1 or higher for 10 consecutive business days. This means that MindMed has until November 23rd, 2022, to close at or above $1 for ten straight trading days.
If a company fails at this, it is not necessarily game over. After the initial 180 days, if the company still meets all other listing requirements, such as a minimum market cap, they can request another 180 calendar day grace period to regain compliance. MindMed apparently meets all other requirements, so they would likely be eligible for this extension.
This means that MindMed probably has until May 2023 to get its stock back above $1. If at that time they still have failed, the company will be delisted from the Nasdaq.
Even though Barrow did not mention any of the psychedelic medicine company’s plans to regain compliance, there are a couple of obvious ways the company could achieve this. The best-case scenario, of course, is that the stock price climbs back over $1 itself, without any intervention. While I don’t know how likely this is —I try not to make short-term stock movement predictions— it is certainly in the realm of possibility. MindMed has many big catalysts coming soon, such as the launch of a Phase 2b clinical trial using LSD to treat Generalized Anxiety Disorder and the commencement of a Phase 2a trial using its next-generation MM-110 (formerly known as 18-MC) to treat Opioid Use Disorder. As data begins to trickle in from these studies, if it is positive, a rational market would reward the company with a higher stock price as the likelihood of them succeeding long-term would increase.
That being said, my faith in the market acting rationally in the short-term is next to zero.
If MindMed cannot regain a stock price of $1 naturally, the obvious plan B would be to perform a reverse stock split. All other things being equal, this would reduce the number of shares available, while increasing the value of each particular share. For example, if you held five shares at $0.50 and the company performed a reverse stock split of 5 to 1, you would then hold one share worth $2.50.
As reverse stock splits to meet compliance are allowed by the Nasdaq, this seems like a reasonable option. If push came to shove, MindMed could do this, negating the chance of a Nasdaq delisting. Therefore, Barrow’s words that they “certainly do not view delisting as a risk of any sort,” most likely ring true. The company has time and options to avert a delisting, the current climate of uncertainty notwithstanding.
Stay tuned for the release of the full Rob Barrow AMA, early next week.
Full Disclosure: James Hallifax holds small positions in MindMed, Compass Pathways, atai Life Sciences, the Horizons Psychedelic Stock Index, and the Advisor Shares Psychedelics ETF.