Psych SPAC relies on magic mushroom thinking

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

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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)

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

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