Bright Minds’ stock explodes after $35M placement, pain drug news

Bright Minds Biosciences Inc. (NASDAQ: DRUG) shares jumped more than 100% in early-morning trading Friday after the psychedelic drug developer announced a $35 million private placement, capping a week of extreme volatility.

The Vancouver-based company said it plans to issue common shares at $21.70 each, with an option for prefunded warrants at $21.699, according to a statement Friday. Proceeds will fund research and development and provide working capital.

The placement comes after Bright Minds’ stock soared more than 3,000% this week, prompting the company to announce in a Tuesday evening press release that it was “unaware of any material changes” driving the price movement. Its stock skyrocketed from around $2 to as high as $38.49 on Tuesday, before pulling back. The company’s market capitalization ballooned that day from $14 million to $171 million at its peak, Green Market Report reported.

The shares settled at $21.70 Thursday. But the volatility continued Friday morning, with shares trading upward of nearly $50 each, resulting in a market cap of more than $200 million.

Some market observers have speculated that the surge could be attributed to a short squeeze, similar to the phenomenon that drove GameStop Corp.’s stock to dizzying heights in 2021. Dan Ahrens, portfolio manager at AdvisorShares ETF, earlier this week drew parallels to that event, telling The Dales Report that Bright Minds’ stock behavior resembled a “GameStop type of thing.”

By Wednesday, Bright Minds put out a presser that its compound BMB-201 “demonstrated similar efficacy to morphine in preclinical pain models.”

The quick sequence of events – from reporting no material changes, to announcing a breakthrough in pain treatment research, to launching a significant private placement – raises questions about the company’s disclosure practices and the timing of its announcements.

It also mirrors a similar move in August 2022, when Bright Minds denied knowledge of material changes before quickly announcing a private placement, a pattern that could attract regulatory scrutiny.

Bright Minds, which is still in the pre-revenue stage, recently said it was actively seeking investors and potential revenue streams. The company last reported earnings in August, disclosing total cash of $6.19 million as of the most recent quarter.

The private placement is subject to regulatory approvals and may close in multiple tranches. Bright Minds plans to file an SEC registration statement to register the new shares for resale.

Bright Minds did not immediately respond to a request for comment.