Compass’s Upsized IPO Financing Sends ‘Buy’ Signal For Sector

Compass’s Upsized IPO Financing Sends ‘Buy’ Signal For Sector

Just three days after Compass Pathways (US:CMPS) announced its IPO financing of $107.2 million, the company has upsized the offering.

Compass has increased i) the number of shares being offered (up to 7.5 million), ii) the price per American Depository Share ($17.00) and thus the total size of the financing – up to $127.5 million.

At least one notable Compass Pathways shareholder couldn’t resist trumpeting the news on Twitter.

Presumably, this is a reflection of very strong demand for CMPS. For investors who like to bet on IPOs right out of the starting blocks, we could see a real feeding frenzy when Compass commences full public trading on the NASDAQ.

For investors who don’t like chasing stocks on their IPO? Look for even better value for your dollars.

Compass Pathways can’t (and won’t) launch the whole psychedelic drug industry alone. If the market chases Compass itself up to a steep valuation, value investors are going to move further down the totem pole of public companies – seeking more “bang” for their buck.

We already alluded to this in our original coverage of the Compass IPO announcement.
 

a)  Improved market sentiment for psychedelics companies
b)  Increased M&A activity
c)  Trickle-down effect
Few market events excite investors more than a big IPO. Existing psychedelics investors will be more inclined to put new money into these stocks. Many new investors can be expected to be attracted to the sector.

We’re seeing an indication of that “improved market sentiment” already: Compass boosting its IPO financing by roughly 20% — and at a higher unit price.

Increased M&A activity and “a trickle-down effect” can be expected to follow.

New sectors don’t evolve in a straight line. Stock prices for psychedelic drug companies have been trading sideways (or lower) for the past several months.

Investors may look back on this (in hindsight) as an ideal entry window for the psychedelics space. All aboard before the train leaves the station!
 

Published at Fri, 18 Sep 2020 13:20:54 +0000

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