What Has Been Going On With MindMed Lately?

MindMed ($MNMD) – the starry-eyed prospect in the psychedelic biotech space has recently turned into a soap opera starring Freeman Capital, angry retail investors, and piquing the interest of everyone interested in psychedelics. The last few months have been a rollercoaster for the company. Their management appears to remain calm as others are swiping on the war paint and preparing for battle. From a reverse stock split and dilutive financing to a lawsuit against former CEO Stephen Hurst and accusations of mishandling intellectual property by major stakeholder Freeman Capital Management– there has been nothing but controversy surrounding MindMed. 

All this uncertainty has caused extreme volatility in the stock– which only adds to the concern of shareholders. The stock peaked at $15.3 in mid-August. This week it dropped below $3 USD. The high point came shortly after the company announced a 1:15 reverse stock split. The market generally doesn’t take well to reverse stock splits because they imply the desire to artificially inflate the market price. According to MindMed CEO, Robert Barrow, this action was necessary to bring the number of shares available in line with the industry norm and to be in compliance with the NASDAQ minimum bid price– which requires the stock to close above $1 for several consecutive trading days.

As for the lawsuit against Hurst, Barrow claims to have no knowledge of the accusations. He became CEO in December of 2021, at which point he ‘made an effort to end overlap from other organizations.’ In other words, before his take over there may have been employees with ties to other companies which compromised the integrity of MindMed. It is presumptuous to assume that the current management is privy to the misdoings of past employees. However, the Freemans– of Freeman Captial Management– believe that is the case. Jake Freeman has gone on record accusing the company of mismanaging their intellectual property and allowing Ceruvia Lifesciences access to their IP. 

In his interview with psychedelicinvest.com, Barrow brought up patience. This is perhaps the biggest struggle that biotech companies face. The stock market is anything but patient. With an increasingly large amount of retail investors entering the space, the desire for immediate returns is only growing. Retail investors are quick to turn their stance at the first smell of trouble. This is an especially difficult situation for biotech companies because patience is crucial. It takes years to push a drug through the pipeline. So, we are seeing here something that we see with many biotech companies. The investment community stirring things up while the company’s management remains calmly focused on the long-term picture. Though, this is not to say that recent investor concerns are not valid. 

There is of course value in scrutinizing the steps that companies take to reach their goal. Jake Freeman says that

In his interview with Adam Tubero, he acknowledges the irony of his criticizing the current management for being young and inexperienced– as he is only 20 years old. His sway in the meme-stock space gives his a huge amount of support behind him. His publicity from a large return on his 25 million dollar investment in Bed Bath and Beyond gave him a big following. Does this mean that he has the expertise to lead a hostile takeover of a major growth biotech company? 

Robert Barrow’s interview did seem to appease many of the retail investors who had previously jumped behind Freeman in calling for a change in management. Barrow acknowledged that management has not been communicating with investors the way that they should and pledged to correct this going forward. His answers went along the same strategy that Mydecine CEO, Josh Bartch used in his interview with me when the media was incorrectly reporting their downfall. He remained calm, refuted ‘incorrect claims,’ and defended his decisions– such as the reverse split and dilutive financing. He remains confident that dilutive financing was the right decision for the company long-term, though Freeman assures the community that this was a step to undermine his influence in the company. He also claims that the recent drop in the stock price is the fault of Barrow and his financing decisions. Though, Freeman fails to acknowledge his role in driving down the stock by airing his dissatisfaction with the company for all the world to hear. 

A week after the interview was released, Freeman Captial sent out a letter to shareholders saying: “all the issues discussed today happened under Barrow’s ‘watchful eyes,’ and although Mr. Barrow is quite the smooth-tongue and clean-shaven rhetorician, his answers ring hallow.” In the letter, he claims that Barrow’s responses were evasive and outright deceptive. There were multiple claims of the Freemans that Barrow claimed had no factual basis– including that Ceruvia Lifesciences has the freedom to use MindMed’s compound MM-120. 

At this point, this looks like a game of dodgeball with the two sides throwing accusations and dodging the rebuttals while the stock fluctuates as a result. Jake Freeman has expressed his intent to convene the board and fight for changes within management. To my knowledge, he has made no effort to resolve things amicably– Barrow on the other hand expressed this as his preferred route to conflict resolution. If they can resolve this fight, the company still has the potential to bring increased value to shareholders. The company has a strong set of drugs in its pipeline, and despite the recent drama, is in a strong position within the market.

More information will continue to come out over the next few weeks and months that will solidify the claims of either Freeman or Barrow. At this point, we are dealing with a game of he said, she said and it would not be wise to pick a side purely based on their acting performances. Investors should remain aware of the upcoming proceedings, but not become reactionary before ample evidence presents itself. Stocks, especially in biotech, are a long game and require the calm, steady mind that Barrow exhibited in his interview last week.