Breakingviews – Psych SPAC relies on magic mushroom thinking

Boxes containing magic mushrooms are displayed at a coffee and smart shop in Rotterdam November 28, 2008.

LONDON, Jan 21 (Reuters Breakingviews) – Investors in the latest psychedelics-as-therapeutics startup could be in for a bad trip. Eleusis, a UK drugmaker which is attempting to treat depression using the active ingredient in funky fungi, is going public via special purpose acquisition company Silver Spike Acquisition Corp II (SPKB.O). Although the company reckons the market for anti-depressants is worth $21 billion, recent setbacks from peers like Compass Pathways (CMPS.O) suggest the market is failing to get the recipe right.

The terms of the SPAC offer some red flags. To start, there is no additional funding. The deal seems to rely on investors not exercising their redemption rights, which may be tricky given Silver Spike shares are currently trading below their $10 offer price. The company’s lead drug candidate has also not been tested on humans yet. If the trials fail or the readouts are suboptimal the SPAC’s value is likely to plummet. It’s encouraging to see innovators trying novel cures for depression, which affects 280 million people worldwide. But with few ‘shroom successes extant, investors will be taking a risky trip. (By Aimee Donnellan)

Follow @Breakingviews on Twitter

(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

Capital Calls – More concise insights on global finance:

Unilever neatly soaks up India’s two-tier recovery read more

Peloton gains pandemic dadbod read more

Netflix’s CEO duo look too high up read more

French vaccine success will leave mark on UK read more

Rivian’s investors prove an expensive ride read more

Editing by Rob Cox and Karen Kwok

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.