The world’s very first psychedelic exchange-traded fund began trading on Wednesday on the NEO Exchange in Toronto. The Horizons Psychedelic Stock Index ETF (TSX:PSYK) tracks the North American Psychedelics Index. The development marks a major milestone for the growing interest in the use of these drugs as potential mental health treatment options. The investment world has taken notice and has led to a few major companies attempting to capitalize on the fast-growing industry.
What’s in the ETF?
The Kevin O’Leary backed MindMed (MMEDF) is one of the 17 companies included in the ETF. MindMed has seen its shares soar since September as many are expecting it to follow the outlook for cannabis legalization. MindMed currently trades on the NEO Exchange and the over-the-counter market in the United States but has applied to be uplisted on the NASDAQ. Others such as Seelos Therapeutics (SEEL) and Nova Mentis Life Science (NOVA) have seen share prices jump in this time as well.
The 17 companies included in the Horizons Psychedelic Stock Index ETF are focused on using psychedelics to treat mental-health problems such as depression, anxiety, post-traumatic stress disorder (PTSD), and others. The introduction of many companies to such a hot corner of the investing market was bound to lead to at least one ETF eventually. The evolution of people’s opinions on cannabis leading it to be legalized for recreational use in many states and legal for medicinal purposes in the vast majority has partly led to bullish analysis on psychedelics for mental health treatment.
Case for Psychedelic Investment
The progression mindset about cannabis and its potentially beneficial attributes has led to some enthusiasm bleeding over to psychedelics but the biggest recent factor that led to share prices rising was the legalization of MDMA (i.e. ecstasy) in Oregon and Washington D.C. at licensed facilities. Other psychedelic substances were approved at licensed facilities for mental health purposes in these states with similar proposals in California, Vermont, and Iowa. This development along with some expectations that President Biden will advocate for the medicinal legalization due to mental health struggles in the U.S. along with an opioid crisis, has many wanting to invest now while its just taking off. Early legalization efforts and a massive mental health market are promising signs for this industry, but if cannabis is its most comparable product, it may take longer than most expect.
Case Against Psychedelic Investment
While a large majority of states have voted to legalize cannabis for medicinal use, only 11 have legalized for recreational use. The bigger problem for psychedelic medicinal use is that it took a long time for cannabis to get where it is now and it's still not fully legalized. Even the states that have approved it have many towns and cities that have banned retail stores. Additionally, cannabis stocks experienced a nice surge once they began trading but have been struggling since early 2019. Investors looking to jump on before this rocket takes off might want to consider that Oregon legalizing something isn't exactly a guarantee that the rest of the country jumping on board any time soon.
There were a lot of social factors that kept cannabis from being legalized even just for medicinal purposes for a long time. It seems arrogant to think psychedelics won't have similar problems. Getting over the preconception that these drugs aren't just for use at rave parties will be particularly difficult for a large segment of the population. Even still, some believe these drugs will disrupt a $70 billion market for mental health treatment that has only gotten more attention in recent years due to the nation’s various struggles especially now coming out of the coronavirus pandemic.
