Penny stock Mind Medicine (NASDAQ:MNMD) stock nearly doubled overnight on rumors of a short squeeze.
Shares that opened at 68 cents early on Aug. 17 were trading at $1.16 before the market opened on Aug. 18, after trading as high as $1.40 earlier in the morning.
The move comes as the company prepares for a 1-for-15 reverse stock split. After the split, there will be 28.4 million shares outstanding.
MNMD Stock: Behind the News
MindMed is researching the use of psychedelics for treatment of anxiety, pain, substance abuse and autism. It has a pipeline of drug candidates, but none are on the market currently. The company lost $17 million in the second quarter, 4 cents a share. It had about $105 million in cash on the books at the end of the quarter.
The stock is being helped by a decision from Cantor Fitzgerald to launch coverage with a price target of $3 per share pre-split. The decision was shared on Reddit, where traders urged others to “bring it back up where it should be.”
The Cantor call is based on hope that MM-120, now in Phase 2 trials, could prove effective against ADHD and generalized anxiety. The drug is an LSD D-tartrate, a version of the 1960s psychedelic still listed as a Schedule 1 drug. The company is also studying LSD for cluster headaches and major depression.
While success would help a lot of people, there are no guarantees. A Phase 2 study will only show whether a treatment works. A Phase 3 study is still needed to show it’s both safe and more effective than standard treatments.
What Happens Next?
StockTalk Weekly said it has issued three alerts on MindMed since Aug. 10. In the short term, it’s a short-squeeze meme like Bed Bath & Beyond (NASDAQ:BBBY), which is down 19% after Ryan Cohen, who had kicked off its rally, filed to sell his stake in the retailer.
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On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.