Fall is finally upon us, but summer didn’t exactly end with a September to remember for publicly traded medicinal psychedelics companies.
Math Over Myth strives to help retail investors avoid getting bled in a dead red market. Corporate press releases often offer inspired empty promises for a benevolent and prosperous future, but as sure as the high card rules a game of seven card stud, so it goes with price action in the Crazy Capitalist Casino.
Let’s begin by focusing on the psychedelic sector’s ETFs and get a sense of the month’s performance for 2022.
Spotlight previously covered AdvisorShares Psychedelic ETF (NYSEARCA: PSIL) & Elemental Advisors PSYK ETF (NYSEARCA: PSYK) in a primer for the sector’s exchange traded funds and their utility in amplifying gains while mitigating risk through diversification. The primer also highlights key differences between the ETFs:
PSIL is the only one which is actively managed. … This allows them to invest [large] sums into smaller companies they believe have greater opportunity [and] quickly rebalance their ETF in response to changing variables. PSIL is a pure-play psychedelic medicines ETF, with [all 28 constituents] being a psychedelic [stocks]. They have $5.9 million under management.”
PSYK is passively managed based on market cap, this time tracking the Enhanced Consciousness Index [using] a “proprietary natural language processing algorithm” to pick eligible companies. Not all the companies included must be primarily focused on psychedelics, however. According to the ETF’s prospectus, “if fewer than 25 psychedelic treatment companies qualify for inclusion in the Index, the Index will also include neurology biopharmaceuticals companies.” This appears to be the case, as many of the larger companies are those working on solving the same problems as the psychedelics industry —such as various forms of depression and central nervous system disorders— but are doing so without psychedelic compounds. PSYK is rebalanced [quarterly], though companies can only be added to or dropped from the index once a year. In comparison to [PSIL], PSYK is tiny, with only $706,561 under management.
Despite sharing a common outlook on the sector, PSIL and PSYK differ in strategy, execution, size, and even their respective constituent companies. This will lead to diverging outcomes. For example, one may infer that an actively managed ETF such as PSIL is better suited to navigate the current psychedelic market storm. However, an actively managed fund is only as strong as that respective fund’s management team. Cathie Wood’s ARK Invest ETFs exemplify this dichotomy, as she was successful during the latest bull run but couldn’t avoid massive losses during the ongoing market correction.
Actively managed PSIL is down 55.8% YTD and down 33% for September. Passively managed algorithm index-driven PSYK, however, is only down 12% YTD and down 7.5% for September. PSYK is outperforming PSIL thus far by a significant spread. PSIL’s ability to outperform the psychedelic sector’s market correction through active management is proving to be a fool’s errand, while PSYK’s performance, despite being slightly negative, still ended up successfully outperforming the sector and sparing investors much of this year’s and September’s pain.
Now we’ll explore how the key players in the space performed during the month of September.
CYBN is down 61% YTD and down 57% in September, but management is currently executing on their fundamental strategy more effectively and efficiently than any other company in the sector. In fact, CYBN recently announced an agreement to acquire Mindset Pharma’s (OTC: MSSTF CNSX: MSET) family of tryptamine compounds.
Here’s a primary example of a Math Over Myth focal point: fundamentals and technicals don’t always immediately reconcile and often diverge. Markets are clouded by FUD (fear, uncertainty, and doubt) at present, exacerbated by the Federal Open Market Committee’s (FOMC) unforced error of monetary over-tightening to preemptively combat a presumptive recession spoken into existence by some FOMC members and mouthy CEOs like FedEx.
Now you know MSSTF’s news for the month as well. MSSTF is down 17% in September.
MNMD was nothing short of a catastrophe this month. It tanked after the reverse split and meme rally. Then management scored another own-goal by announcing a highly dilutive equity financing round of $30M priced well below market, causing the stock to plummet even lower than the underwritten price per share. MNMD is down a staggering 69% in September.
The psychedelic corporate shakeout continued in September, as another company, HAVVLF, folded due to lack of cash flow.
In 2020, HAVN received permission from Health Canada to possess specified amounts of psilocybin for quality control research and development, which allowed them to diversify into manufacturing natural health products as well as developing a portfolio of psychoactive compounds for clinical trial research. But profitability didn’t reconcile to HAVN’s narrative.
Earlier this year, HAVN CEO Tim Moore touted the Company as one of the few psychedelic companies to report revenue in 2022. According to Moore, HAVN’s competitive advantage was based on their supply chain delivering products to other companies relying upon it for their own respective psychedelic-related operations. He also claimed the nutritional supplement business was experiencing momentum with e-commerce retailers, promising “significant growth coming in 2022.”
However, Serious red flags were raised over the past year when HAVN terminated an acquisition, completed a 30:1 reverse split in July, secured $9M CAD in debt despite a market cap of only $1M CAD, and reported a loss of $22M CAD in the last fiscal year. Regardless of CEO Moore’s optimistic outlook, revenue was only $89.7K CAD for the same period.
HAVLF is down a whopping 74% in September.
Cathy Wood’s ARKG ETF is consistently buying ATAI, but she’s got that Reverse Midas Touch of late. ATAI is also one of two main patent trolls in the sector backed by fascist billionaire Peter Thiel.
Companies like ATAI don’t want full legalization of psychedelics. They want to control the medicinal psychedelics 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. In other words, proprietary IP is the driver of the oxymoron called free market capitalism.
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.
Moreover, I pointed out that, according to my technical analysis, ATAI was never a buy and still wasn’t at press time. Despite announcing initiation of a Phase 1 Trial for its MDMA Derivative, EMP-01, ATAI is down 26% in September.
The entire Cathy Wood, patent trolling, Peter Thiel story also applies to CMPS. They are the other dubious actor in the psychedelic space. CMPS is down 36% in September.
Mid-month NUMIF updated markets on their Novamind acquisition integration, rebranding, and announced new client financing options. NUMIF is down 28% in September.
GHRS is down 17% in September with no tangible news for the month but remains atop the list of psychedelic stocks by market value.
RVVTF announced the submission of amended Phase 3 COVID-19 Study Protocol to the FDA mid-month and updated markets on the Phase 3 Clinical Trial for Bucillamine in COVID-19 three days ago. RVVTF also provided an update on their psilocybin clinical study for methamphetamine use disorder and oral psilocybin thin film strip program. RVVTF is down 35% in September.
After August’s meme stock mania on message boards, DRUG has consistently pulled back and is down 35% in September.
OPTHF kicked off the month with a progress report on their year of commercialization. One week later, they signed their first international mushroom supply agreement with UK-based Avida Global. Just a day later, OPTHF announced the completion of the largest legal, natural psilocybin harvest in Canadian history. Toward month’s end RVVTF and ATMA Journey announced they’re proceeding with a Phase I natural psilocybin and MDMA clinical trial application to Health Canada.
Sounds like OPTHF is a continuing execution story!
However, despite the good news OPTHF is down 28% in September.
IWINF began September by announcing their intent to add a Ketamine Clinic in central Ohio on the 6th. Towards month end on the 29th, they announced a definitive agreement to acquire Ketamine Media in an accretive transaction.
Subject to regulatory approval, the total consideration at closing will be paid in cash, including the assumption of certain debts of Ketamine Media. The total consideration is to be paid in a combination of cash and stock, with the maximum payable contingent on a number of milestones related to profitability and operational goals. Further detail will be provided upon closing. IWINF is down 21% in September.
On September 1st WSNAF announced the sale of its clinic management services organization (MSO) assets for USD$2.1M. CEO and former NHL Stanley Cup Champion Daniel Carcillo touted the move as streamlining the company’s strategy and strengthening their Balance Sheet. WSNAF is down 33% in September.
Craig D. Schlesinger is the CFO of PSYC Corp & Spotlight Media 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: @PSYCCraig
Math Over Myth Primer | Math Over Myth Archive
Craig holds no positions in ARKG, PSIL, PSYK, ATAI, CMPS, CYBN, DRUG, GHRS, IWINF, MNMD, MSSTF, NUMIF, OPTHF, RVVTF, or WSNAF
*For purposes of this article, all percentages are approximated and rounded to the nearest percentage point from market data provided by Google Finance about one hour prior to market close on September 30, 2022
Shutterstock
Psychedelic Spotlight is your reliable source for the latest stories in the emerging psychedelics industry, covering breakthrough discoveries, investor news and cultural reform.
Prolonged DMT Infusions could be a Breakthrough for Stroke PatientsBy signing up to the Psychedelic Spotlight newsletter you agree to receive electronic communications from Psychedelic Spotlight that may sometimes include advertisements or sponsored content.
If PSYK doesn’t hold much in terms of pure psychedelic stocks, should it’s performance be compared to PSIL?? or should it be compared to a biotech ETF??