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MindMed, MNMD, Up 1,247% – Or Really, Down 11% For Meme Stock?

Tim Worstall
Tim Worstall trader
Updated 29 Aug 2022

Trade Mind Medicine Stock Your Capital Is At Risk

Key points:

  • Mind Medicine stock was up 35% Friday
  • Now MNMD is up another 1,247% this morning premarket
  • Wait now, that can't be a real price rise, can it?

Mind Medicine, sometimes MindMed (NASDAQ: MNMD) stock is listed as up 1,247% this morning. A better evaluation would be that MNMD is in fact down 11% premarket. Yes, MindMed has become – or at least seems on the verge of becoming perhaps – a meme stock but even for those a 1,250% stock price rise would be remarkable. What has actually happened is that the nominal price is up by 1,500% in one manner, the real price is down by about that 11%. This all being complicated by the way that MindMed stock rose 35% on Friday. That was a real price move and so is the 11%. The 1,500% is purely nominal.

So, what's actually going on here? Mind Medicine stock rose 35% on Friday. That was because the DEA (Drug Enforcement Agency) has decided to stop being stupid. Well, we could put in other terms so perhaps we should. MindMed is a clinical stage biopharmaceutical company looking into the possibility of using psychedelic drugs for more than just seeing the pretty stars inside our heads. This seems entirely logical to be honest. We know – that's why folk take them – that they have considerable effects upon human beings. Some of them most certainly not desirable but what if mixed in there were ones that were?

So, there's a definite move to research what might be the beneficial effects of psychedelics. This having two different roadblocks. One of which is doing the research to find out, but then every potential treatment faces that. The other is the DEA which insists that no one, not even researchers, should be playing with drugs. Just Say No, recall? On Friday the DEA said that it was allowing said research on another two following the month earlier abandonment of restrictions upon another five. This is good for those researching psychedelics.

Mind Medicines share price
Mind Medicines share price from IG

Also Read: Five Best Pharmaceutical Stocks to Watch in 2022

But it's also true that MindMed stock is down 78% on the year. That means the price is well below $1, which is a problem. To retain a NASDAQ listing requires a minimum offer price of $1. This being entirely fashion. New York just thinks that under a dollar is penny stocks – which it is of course, logically. But penny stocks is where all the charlatans play. Therefore you can't be a – long term – penny stock and also have a listing on a major market – NASDAQ or NYSE etc.

The solution to this is a reverse stock split – a consolidation to Brits. Simply reduce the number of shares in issue. The one here at MNMD was 15 for 1 – for every 15 shares owned on Friday there exists now only 1. This purely nominal change should lead to an equally nominal 1,500% change in the MindMed stock price. It hasn't – that nominal price is up 1,247%. Which means that there's been a real fall in the Mind Medicine stock price – 1,500% that should have happened, minus the 1,247% that did – about 11% among friends. This is complicated by the 35% rise on Friday, so we can say up in real terms since open Froday, down in real terms since close Friday – but whatever it is it's simply not a real price movement of 1,250% or so, it's a purely nominal one.

Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.