Since the first psychedelic companies went public in March, an array of other psychedelic start-ups followed along in a trend that can now be safely referred to as the "Psychedelic Rush."
In the last two months, at least five different psychedelics companies announced plans to go public in Canada, including Cybin Corp., Entheon Biomedical, Novamind Ventures, Silo WellnessandHavn Life Sciences.
With the exception of Havn, each chose to go public by way of reverse take-overswith companies from the mining sector.
As was the case with the boom of cannabis in 2013, mining companies driving the junior capital markets in Canada have laid thegrounds for the development of high-risk venture industries.
Today, psychedelics are taking the lead.
What seems like an unusual combination of industries is actually a run-on-the-mill event for Canadian capital markets.
Richard Carleton, CEO of the Canadian Stock Exchange, explainedthat the Canadian small-cap space has been largely focused on early-stage mining exploration, includingoil and gas.
These companies have two possible outcomes. They either find something worth drilling and raise additional capital to develop a mine, or they dont find anything.
And so you have basically a group of companies that have raised some money, explored a property, didn't succeed and now the management team and the shareholders are looking for another opportunity,Carleton said.
Thats where psychedelicscome in. These companies are trying to raise money quickly, and going public through a reverse acquisition is one of the fastest ways to do it.
In a reverse takeover (RTO), a private company looking to go public will merge with a public company in order to bypass the lengthy and expensive process of an initial public offering.
Alan Friedman, Principal at Bayline Capital Partners adds that the mining companies are available, but they're not mining companies anymore.
Once upon a time they were mining operating companies.Today, they're defunct. They're just sitting there listed on the stock exchange. And they're good vehicles to reverse other assets into.
For Friedman, the mining sector has hot cycles that lastabout sevenyears.
In 2013, one of these cycles came to an end. That moment happened to coincide with the cannabis boom. Cannabis companies were looking for ways to go public and the mining, oil and gas sector had left the perfect riverbed for a high-risk, junior capital investment market.
The same thing is happeningwith psychedelics.
When you see psychedelics come along in 2020, it's the new hot, trendy business. They can raise money, but they have to go public quick," says Friedman. "Because a lot of the money that comes in is based on the fact they go public, because those investors like to see liquidity."
According to Friedman, the quickest way for a company to go public is by way of a reverse takeover, because the vehicle and the shareholders are already there.
80% of the companies in Canada go public by way of a reverse takeover," Carleton said. "So it's a very well-traveled path."
It's also less expensive.
It could be a good few hundred thousand bucks cheaper," Friedman added. "And it could be a few months quicker.
Friedman is currently working with a private psychedelics company called Mind Health, which is in the process of negotiating a reverse takeover, and plans to go public in three months.
RTOs, however, also come with their fair share of challenges.
When you're switching industries, the shareholders are not in any way necessarily interested in that story or in that sector. And what can happen in a number of instances is that at the first sign of any kind of buying interest, once the company has gone public, those shareholders tend to sell so that it's almost like there's a built-in overhang in the company's cap table, Carleton explained.
As a result, when the company goes public, its harder to see the same kind of exuberant price moves seen when companies that go public by way of an IPO.
Also, with an RTO, the new company inherits all of the liabilities associated with the former company. And of course, in the case of mining companies, there may well be environmental issues, saysCarleton.
Its crucial to do due diligence and proper research an RTO partner before committing to a deal,Friedman advised. Although in every case there's risk.
Nonetheless, RTOs are the preferred method of going public for small-cap companies in the junior markets/IPOs are reserved for larger, more established players who typically goafter senior equity markets.
Cybin CEO Paul Glavine is currently in the process of doing a reverse takeover with a mining company called Clarmin Explorations.
Cybin achieved full support from over 60% of Clarmin's existing shareholders, Glavine said in an email. In this case, Clarmins management team will step out to let Cybins team on the helm.
Other psychedelics companies, like Entheon Biomedical which merged with mining company MPV Exploration looked for added value in their partner company. CEO Timothy Ko saidMPV provided more than just a means to trade their stock on the open market.
"There was no shortage of interested, I guess, 'shell'partners. I think Canada has a plentitude of those opportunities available. But ultimately, it was a process of discernment where we had to say, 'okay, the nature of the investor and the management on the other side, do they have a strategic value to us?'"says Ko.
Entheon found that MPVs investors could add value to the company by bringing in their shared experiences in biotech, pharma and healthcare, and the management team could offer its experience raising money in the public markets.
Picture based on photos byPhoto by Dominik Vanyiand on Unsplash.
2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Follow this link:
Why Are Psychedelics And Mining Companies Merging In Canada? - Benzinga
- 8 Mystical Herbs and Legal Psychedelics For Lucid Dreaming - December 8th, 2016 [December 8th, 2016]
- Psychedelics: LSD, Mushrooms, Salvia | Facts | Drug Policy ... - December 10th, 2016 [December 10th, 2016]
- FS Book Company - Marijuana Books - December 12th, 2016 [December 12th, 2016]
- Psychedelic - PsychonautWiki - December 27th, 2016 [December 27th, 2016]
- From Alzheimer's To Psychedelics, 2016 Was A Good Year For ... - January 3rd, 2017 [January 3rd, 2017]
- LSD - Psychedelic Effects - The Good Drugs Guide - January 5th, 2017 [January 5th, 2017]
- THC - Psychedelics - January 29th, 2017 [January 29th, 2017]
- Psychedelics | Pharmacological Reviews - January 30th, 2017 [January 30th, 2017]
- Dorian Yates reveals all on steroids, body dysmorphia, psychedelics, cannabis and yoga - Express.co.uk - February 7th, 2017 [February 7th, 2017]
- Psychedelic drug therapy including magic mushrooms, LSD and ... - CBS News - February 7th, 2017 [February 7th, 2017]
- Psychedelics Being Tested For Use In Treating Various Conditions - CBS Local - February 8th, 2017 [February 8th, 2017]
- The psychedelic renaissance - Boulder Weekly - February 9th, 2017 [February 9th, 2017]
- Buy psychedelics online : Chinglabs.com - February 12th, 2017 [February 12th, 2017]
- Psychedelic drugs like magic mushrooms and LSD have key ... - Yahoo Finance - February 13th, 2017 [February 13th, 2017]
- Psychedelics a Viable Therapeutic Option for Depression - Psychiatry Advisor - February 14th, 2017 [February 14th, 2017]
- Is Silicon Valley Onto Something With Its LSD Microdosing? - Newsweek - February 15th, 2017 [February 15th, 2017]
- News Releases - Noozhawk - February 16th, 2017 [February 16th, 2017]
- A Revolution in the Science of Psychedelics is Happening in Boulder - 303 Magazine - February 16th, 2017 [February 16th, 2017]
- When Reality Is More Intense Than Psychedelics: Strand Of Oaks ... - NPR - February 17th, 2017 [February 17th, 2017]
- Psychedelics Help Reduce Opioid Addiction, According to New Study - AlterNet - February 22nd, 2017 [February 22nd, 2017]
- Psychedelics May Help Reduce Opioid Addiction, According To ... - Huffington Post - February 23rd, 2017 [February 23rd, 2017]
- Psychedelics Help Reduce Opioid Addiction, According to New Study - eNews Park Forest - February 24th, 2017 [February 24th, 2017]
- Psychedelics Could Play A Role In Tackling The Opioid Epidemic - Huffington Post - February 24th, 2017 [February 24th, 2017]
- Meet The People's Champion of Psychedelic Drugs - Narratively - February 27th, 2017 [February 27th, 2017]
- How psychedelics like psilocybin and LSD actually change the way ... - Yahoo Finance - February 27th, 2017 [February 27th, 2017]
- First U. student group on studying psychedelics holds open house - The Daily Princetonian - February 27th, 2017 [February 27th, 2017]
- How psychedelics like psilocybin and LSD actually change the way people see the world - Businessinsider India - February 28th, 2017 [February 28th, 2017]
- Psychedelics Help Reduce Opioid Addiction, According to New ... - February 28th, 2017 [February 28th, 2017]
- WATCH: A Public Policy Expert Explains How to Safely Deregulate LSD and Other Psychedelics - AlterNet - March 7th, 2017 [March 7th, 2017]
- Quotes About Psychedelics (48 quotes) - March 7th, 2017 [March 7th, 2017]
- Inside the Psychedelic Underground - RollingStone.com - March 9th, 2017 [March 9th, 2017]
- What Psychedelics Really Do to Your Brain - Rolling Stone - RollingStone.com - March 10th, 2017 [March 10th, 2017]
- Hallucinogens Help, According to a Mom's Memoir and Son's Documentary - Bedford + Bowery - April 8th, 2017 [April 8th, 2017]
- Meditation and the psychedelic drug ayahuasca seem to change the brain in surprisingly similar ways - Businessinsider India - April 8th, 2017 [April 8th, 2017]
- Tripping out: the highs and lows of psychedelic therapy - Marie Claire UK - April 8th, 2017 [April 8th, 2017]
- Stop Policing Psychedelic Science - Motherboard - June 6th, 2017 [June 6th, 2017]
- America's Trippiest Chemist: Making Psychedelics 'Was Fun' - Motherboard - June 6th, 2017 [June 6th, 2017]
- The Three Types of Hallucinogens: Psychedelics ... - June 7th, 2017 [June 7th, 2017]
- Cary Grant was one of the first to benefit from LSD therapy - Quartz - June 11th, 2017 [June 11th, 2017]
- What it's like to take psychedelics in small doses at breakfast - New Scientist - June 14th, 2017 [June 14th, 2017]
- 'Changing Our Minds' explores psychedelic drugs and spiritual healing - Religion News Service - June 14th, 2017 [June 14th, 2017]
- Q&A With Psychedelic Stand-Up and LaughFest Headliner Shane Mauss - Flagpole Magazine - June 20th, 2017 [June 20th, 2017]
- Q&A: LaughFest comedian talks science and psychedelics - Red and Black - June 20th, 2017 [June 20th, 2017]
- 'Changing Our Minds' explores psychedelic drugs and spiritual healing - The Daily Tribune - June 21st, 2017 [June 21st, 2017]
- Shane Mauss brings Good Trip Comedy Tour to town - Chattanooga Times Free Press - June 22nd, 2017 [June 22nd, 2017]
- 'Changing Our Minds' explores psychedelic drugs and spiritual healing - The Oakland Press - June 22nd, 2017 [June 22nd, 2017]
- Director Ana Lily Amirpour on Cannibalism, Psychedelics, and 'Horrifying' Racism Allegations - Jezebel - June 23rd, 2017 [June 23rd, 2017]
- Majority of Americans ready to embrace psychedelic therapy - YouGov US - June 24th, 2017 [June 24th, 2017]
- The Refugee Funding America's Psychedelic Renaissance - VICE - June 24th, 2017 [June 24th, 2017]
- Open Your Mind This Weekend at Europe's Largest Psychedelic Conference - VolteFace Magazine (blog) - June 27th, 2017 [June 27th, 2017]
- Psychedelics and Virtual Reality Make a Trendy but Illegal Therapy - Inverse - June 27th, 2017 [June 27th, 2017]
- The war on drugs is back. Will psychedelic drug research survive? - The Verge - June 29th, 2017 [June 29th, 2017]
- Tune in, Turn on, Stay in School - Study Breaks - July 2nd, 2017 [July 2nd, 2017]
- Cannabist Show: He's psychedelic comedian Shane Mauss - The Cannabist - July 2nd, 2017 [July 2nd, 2017]
- The brain on DMT: mapping the psychedelic drug's effects - Wired.co.uk - July 3rd, 2017 [July 3rd, 2017]
- Psychedelics Could Help Asia's Mental Health Care, But Stigma Remains Roadblock - TheFix.com - July 3rd, 2017 [July 3rd, 2017]
- Is LSD the new coffee? - FactorDaily - July 4th, 2017 [July 4th, 2017]
- My grandfather was a death row doctor. He tested psychedelic drugs on Texas inmates. - Texas Tribune - July 5th, 2017 [July 5th, 2017]
- About Us | Trusted News Source for Psychedelic Research ... - July 6th, 2017 [July 6th, 2017]
- Do Psychedelic Drugs Cause the 'Prophetic Effect'? - Breaking Israel News - July 11th, 2017 [July 11th, 2017]
- Are psychedelics the new medical marijuana? - WTSP 10 News - July 14th, 2017 [July 14th, 2017]
- Psychiatrists Say Cannabis Medicine Has Psychedelic Properties - The Marijuana Times - July 15th, 2017 [July 15th, 2017]
- Can Psychedelics Be Therapy? Allow Research to Find Out - New York Times - July 17th, 2017 [July 17th, 2017]
- Countdown To (Legalized) Ecstasy! Rick Doblin, MAPS, & the Psychedelic Renaissance [Podcast] - Reason (blog) - July 20th, 2017 [July 20th, 2017]
- Should We Reclassify Marijuana as a Hallucinogen? - Big Think - July 20th, 2017 [July 20th, 2017]
- Do You Take Drugs at Festivals? This Initiative is Working on Keeping You Safe - PoliticalCritique.org - July 20th, 2017 [July 20th, 2017]
- Psychedelic drugs could tackle depression in a way that antidepressants can't - INSIDER - July 22nd, 2017 [July 22nd, 2017]
- Psychedelic Shine takes a trip to the skies in Boulder - Boulder Daily Camera - July 22nd, 2017 [July 22nd, 2017]
- Reasons to Consider Trying Psychedelics - FoxWeekly - July 27th, 2017 [July 27th, 2017]
- Psychedelics and Normality - HuffPost - July 27th, 2017 [July 27th, 2017]
- New book about psychedelics and weird human experiences - Boing Boing - July 27th, 2017 [July 27th, 2017]
- Scientists Want You to Give Them Money to Study ... - July 29th, 2017 [July 29th, 2017]
- What Has Awe Done for Me Lately? - HuffPost - August 1st, 2017 [August 1st, 2017]
- For children, it's beyond psychedelics - The Hans India - The Hans India - August 1st, 2017 [August 1st, 2017]
- Expanding consciousness - 48 Hills - August 2nd, 2017 [August 2nd, 2017]
- THE FUTURE OF PSYCHEDELICS: Are LSD and Mushrooms The New Prozac? - Dope Magazine - August 5th, 2017 [August 5th, 2017]
- Psychedelic drugs saved my life. So why aren't they prescribed? - Wired.co.uk - August 9th, 2017 [August 9th, 2017]
- LSD as therapy: How scientists are reclaiming psychedelics ... - August 9th, 2017 [August 9th, 2017]
- The foundation of Western philosophy is probably rooted in psychedelics - Quartz - August 12th, 2017 [August 12th, 2017]
- Crazy Enough to be Correct - HuffPost - August 15th, 2017 [August 15th, 2017]