Psychedelic Startups Turn to Stock Payments to Address Financial Struggles
LOS ANGELES– Psychedelic medicine companies are facing financial challenges due to the long runway to commercialization. Unlike cannabis, which saw rapid changes in laws, quick establishment of programs, and the issuance of thousands of licenses, the psychedelics industry has always emphasized a long path to profitability. The industry is now facing the realities of producing revenue and financing companies for 12 years or more. As a result, several psychedelic startups are taking serious measures to stay afloat.
Some companies are paying off their debts with stock, including Mydecine and Silo Wellness. Mydecine recently eliminated $752,160 of liabilities by issuing 1,299,998 settlement shares. Similarly, Silo Wellness converted $1 million of debt into common shares, and is late in delivering audited annual financial statements and management discussion & analysis. Havn Life Sciences is also converting its convertible debentures into stock and restructuring, while Core One Labs issued shares to settle debts.
While issuing shares to pay off debt is not necessarily problematic, it can be viewed as a move from a weakened company. Solid companies with lots of revenue typically buy back shares or pay off debt with earned income. Therefore, investors need to be aware that it could be a sign of weakness when companies in the psychedelics industry address bills and debts.
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