A magic mushroom company – psilocybin being the active chemical around which the company intends to surround its operations – is going public. Before feeling too good about this, let it be known that documented buzzkill Peter Thiel owns 7.5% of the company.
And let’s be honest: the corporatized magic mushrooms are gonna be lame in a way we just don’t know yet and likely won’t be accompanied by the needed legalization of psilocybin. All snark aside, psilocybin could be a novel way to help those suffering from depression – hence early stage FDA approval and IPO.
The core question at hand for this blog is why did a SPAC not identify this company for acquisition? It calls into question the adverse selection problem facing SPACs. If a magic mushroom company can file for an IPO on NASDAQ, what significant hurdles deter other privately-held companies from the IPO process that a SPAC alleviates?
This question extends itself along the theme of Peter Thiel – sorry if that is not your thing but the guy is everywhere! – with the merger of Luminar Technologies, a LIDAR self-driving car company, and blank-check SPAC Gores Metropoulos, sponsored by a Los Angeles private equity firm. Peter Thiel is an investor also in Luminar and the company’s CEO and founder skipped college as a Thiel Fellow to pursue entrepreneurship instead. So given that he is investor in both highly speculative firms, why take one public via SPAC and the other through classic IPO?
The conclusion is likely explained by sector: pharmaceutical stocks whose drug treatments are more speculative in their economic viability come to the public markets with great regularity and have done so for a long time – even if with a novel chemical treatment that lends itself to innuendo – in comparison to self-driving car companies.
As the crop of new SPACs emerges in 2020, perhaps the circumstance of a magic mushroom company going public via SPAC simply awaits in the future.
San Francisco Securities Outlook 