If atai trades in the expected manner off its IPO, it will quickly have a market cap greater than the combined market caps of every other psychedelic drug public company today
Investors in psychedelic stocks will be aware that atai Life Sciences just raised another big whack of cash. The company added
$157 million in its Series D Financing Round.
According to Bloomberg, insiders crunching the numbers on this offering say that it implies a valuation of
roughly $2 billion for atai.
It was right after atai’s
$125 million Series C Financing that atai announced its intention to go public in the spring of 2021. At that time, anonymous insiders were reporting that atai would seek an IPO valuation
“between $1 and $2 billion”.
In a span of 6 weeks, it appears that the price-tag for atai has risen substantially.
Then there is the rest of the psychedelic drug industry.
Selloff in psychedelic drug stocks
Spurred on by recent weakness in the broader markets, psychedelic drug stocks have given back all of their 2021 gains and most are in the red to start the new year.
Valuations are getting extremely compressed for some of these companies.
As of this morning, industry leader
MindMed Inc (CAN:MMED / US:MMEDF) has nearly fallen by half from its 2020 high (CAD$6.47).
Cybin Inc (CAN:CYBN / US:CLXPF), which has raised CAD$90 million in less than 6 months and has a psychedelic drug in a Phase 2 clinical trial has a market cap of only CAD$208 million.
MindMed’s market cap is now less than half of the implied valuation for atai. Cybin has 1/10th the market cap.
Then there is
Mind Cure Health (CAN:MCUR / US:MCURF). MINDCUR went public last September and has raised CAD$29.6 million. But it is currently trading at
less than two times cash.
This is despite the fact that MCUR is currently
launching its line of nootropics, it’s is preparing to open its first
psychedelics-assisted mental health clinic in May, and it has recently announced its full psychedelics R&D program – and has a renowned researcher
directing its TBI research.
We can talk about atai currently being valued at
more than double MindMed,
more than 10X Cybin, or
60X as much as MINDCURE today. But what about when atai has its own IPO?
Compass Pathways (US:CMPS) quickly tripled off its own IPO. Virtually no one got in below $25 – 50% above its IPO valuation.
Huge build-up for atai IPO
The atai IPO is even more eagerly anticipated than that of CMPS. Atai has a much larger psychedelics platform.
But let’s assume it merely trades equal to CMPS. That would mean atai quickly soaring to a $6 billion valuation – with no retail investors getting in below $3 billion.
If other psychedelic stocks are priced the same at that time, it would give atai
over 6X the market cap of MindMed,
over 30X the market cap of Cybin, and
more than 150X as much as MINDCURE.
At even 50% above its current valuation ($3 billion), atai would have triple the market cap of MindMed, nearly 50X the market cap of Cybin, and roughly 80 times as much as MINDCURE.
Psychedelic Stock Watch has already addressed this issue previously. This was when atai was being valued between $1 - $2 billion and other psychedelic stocks were trading 30 – 50% higher than today.
We crunched the numbers in precisely the same manner at that time. And even then, we concluded that investors would likely get more value for their dollar in other psychedelic stocks.
Now, with atai more expensive and other psychedelic stocks much cheaper, this becomes a no-brainer.
Unless you’re an insider or an institution able to buy into the IPO financing,
you will overpay for atai, relative to every other publicly traded psychedelic stock.
Psychedelic stock investors who have been putting aside money to invest in atai – based on vastly different valuation metrics – need to revisit their decision-making here.
atai will not be the best value proposition for investors
When other stocks were near their highs and atai was being valued between $1 and $2 billion, buying into atai looked attractive. With atai significantly more expensive and other psychedelic stocks much cheaper, we are now looking at an entirely different value proposition.
Overpay for atai, or get much more for your money with heavily-discounted psychedelic stocks that are already trading?
We are not talking about fly-by-night companies here. Since the Compass IPO,
these public companies have collectively raised ~US$400. That’s nearly 50% more than atai has raised over the same period.
Yet at a $6 billion market cap,
atai would have a higher valuation than everyone else in the sector – combined. Another NASDAQ bubble stock.
No one is knocking the potential of atai to become a major player (and industry leader) in the emerging psychedelic drug industry. Psychedelic Stock Watch has been a vocal backer.
But is atai worth more than everyone else in the industry combined?
No.
If atai trades in the expected manner off its upcoming IPO, investors will quickly turn to the better value opportunities elsewhere in the sector – just as they did when Compass went public. And other psychedelic drug stocks quickly outperformed CMPS.
Forward-looking investors can anticipate this trading and start scooping up these other bargain-priced stocks
before that rotation begins.
DISCLOSURE: The writer holds shares in MindMed Inc, Cybin Corp and Mind Cure Health. Mind Cure Health is a client of Psychedelic Stock Watch.
