2021 has served up a rocky start for pot stocks, with investors vacating the speculative sector in favour of other prospects.
But that hasn’t stopped the pot stocks in question from exploring new avenues. As can be seen via Creso Pharma Ltd‘s [ASX:CPH] latest venture, announced today.
However, despite these hopes investor sentiment has yet to turn around. At time of writing, the Creso share price is down 1.42%.
From one illegal drug to another
The big news from Creso today is its acquisition of Halucenex Life Sciences. A Canadian company that is looking to capitalise on psychedelic molecules to treat PTSD and depression.
Halucenex is one of a few fortunate researchers to be granted legal access and possession of drugs like psilocybin, more commonly known as magic mushrooms. And by tinkering with these mind-altering substances, they hope to find ways to treat some of our most serious mental illnesses.
It’s a novel, but increasingly popular idea. Driven largely by a need to treat these diseases that have failed to respond to most modern medicine.
However, the potential of psychedelic substances, many of which are illegal, could be a huge breakthrough. A story that led to the listing of fellow psychedelic stock COMPASS Pathways [CMPS:NASDAQ] last year.
No doubt Halucenex is hoping to emulate a lot of their success. Aiming to conduct several clinical trials to showcase whether these drugs may be the holy grail for stubborn mental illnesses.
Now, Creso will be hoping that this research pays off handsomely. Paying $500,000 in cash, and a further $6.14 million to acquire Halucenex. Not to mention a further 17.5 million shares in performance options that could be paid out in the next 12 months.
So, all up, Creso is splashing some serious cash on this deal. Especially seeing Halucenex is unlikely to make any meaningful revenues any time soon.
Nevertheless, it is a speculative bet that management is willing to gamble on. As Creso’s Strategic Advisor Bruce Linton comments:
‘Public policy towards psychedelics is rapidly shifting and we are witnessing a massive regulatory wave which has the capacity to change the way that mental health and wellness is achieved and maintained. Through this acquisition, Creso is directly and immediately in the search for science driven outcomes.’
Clearly though, if today’s share price action is any guide, these outcomes have yet to inspire any great interest from shareholders.
What’s next for Creso share price?
For Creso shareholders, this is at the very least an interesting development. One that may or may not pay off.
In this regard, it could be viewed in one of two ways.
Either it is giving Creso yet another feather to add to their cap, diversifying the company beyond just the market for cannabis.
Or, it could dilute their already strained resources. Taking away valuable time and money from other projects into one that has yet to be a proven success.
Like I said, this is a speculative bet on Creso’s behalf. One that will certainly be interesting to follow.
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For Money Morning