Why Investors Are Psyched About Psychedelic Stocks
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Why Investors Are Psyched About Psychedelic Stocks

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Why Investors are Psyched about Psychedelics

The Briefing

  • Plenty of psychedelic stocks have experienced triple-digit returns in the last year
  • Optimism is brewing as governments grant research approvals for the study of psychedelics on mental health
  • By some estimates, the psychedelic drugs market is projected to see compound annual growth (CAGR) of 16.3% to reach $6.85 billion by 2027

Psyched About Psychedelics

Psychedelic stocks are trading like biotechnology companies these days. The prospect of promising research has pushed valuations upwards. And like biotech companies, they often report no revenues and are a volatile bunch.

Awareness around mental health disorders is increasing, as are the number of people who suffer from them—a figure exacerbated by the pandemic. Although these factors are grim, they are actually catalysts for psychedelic stocks.

The Societal Cost

Today, greater emphasis is put towards combating mental health. In part because its societal cost is increasingly difficult to ignore. And the solutions to them may take on various forms. For instance, alternative medication.

There are over 100 million people who are resistant to traditional treatments for depression. Some studies reveal up to ⅓ of patients experience treatment-resistant depression.

As a result, this is where the application of psychedelics in microdoses is perceived to add value—and where a market may arise.

Regulatory Status

1. Health Canada
Health Canada granted 16 exemptions to a selection of nurses, doctors, therapists and social workers. Thus, allowing them to possess and use psilocybin for personal training without fear of prosecution under the country’s drug laws.

2. The FDA
The FDA declared psychedelics a breakthrough therapy for severe depression.

3. The State of Oregon
Oregon approves a legal framework for the therapeutic use of psilocybin. Becoming the first state to do so.

Mushrooming Valuations

Investors love a good story. And legalizing psychedelic drugs to combat the growing societal challenge that is mental health is as good as it gets.

Psychedelic Stock2020 Stock Price Performance
Mind Medicine864%
Numinus Wellness555%
Red Light Holland300%
Codebase Ventures210%
Revive Therapeutics166%
Hollister Biosciences148%
Lobe Sciences133%
Compass Pathways88%
Better Plant Sciences76%

Some of the earlier research and studies on psychedelics are expected to be released by mid-2021, and investors are already getting ahead of this in optimistic anticipation. This is evident in the valuations of some of these companies, which in some cases are already reaching a billion dollars.

Welcome to the shroom boom.

Where does this data come from?

Source:YCharts & Frontiers In Psychology
Notes: This data was released on September 4, 2020

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Super-Sized Bets for Football’s Big Game (2013-2022)

Expanding legalization has driven an increase in bets on football’s big game, with wagers more than doubling from 2021 to 2022. (Sponsored Content)

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Dollar value of bets for football's big game shown over the last ten years using footballs. The football is much bigger in 2022 to indicate that bets doubled from 2021 to 2022.

The Briefing

  • Sports betting became legal outside Nevada when the federal ban was lifted in 2018.
  • Legalization contributed to betting growth, with wagers on football’s big game increasing ten-fold over the last decade.

Super-Sized Bets for Football’s Big Game

With 99 million viewers in 2022, “more Americans tune in to the Super Bowl than any other television broadcast.” Its large viewership, combined with expanding legislation, has led to ballooning wagers.

In this graphic sponsored by Roundhill Investments, we show how these bets have grown over the last 10 years.

Annual Legal Bets on the Big Game

From 2013 through 2018, sports betting was only legal in Nevada and year-over-year growth was low. However, when the federal sports betting ban was lifted in May 2018, more states started allowing bets.

By 2022, 33 states plus Washington, DC were legally able to bet on the game. Wagers climbed quickly as a result.

YearTotal BetsAnnual Growth
2013$99M5%
2014$119M21%
2015$116M-3%
2016$133M14%
2017$138M4%
2018$159M15%
2019$191M20%
2020$280M47%
2021$486M73%
2022$1.1B119%

Data only for states that report bets on football’s big game, see graphic for full list of states included in 2022.

Impressively, legal bets surpassed the $1 billion mark in 2022. Growth was primarily driven by New York State legalizing online sports betting, with the state contributing nearly $500 million to the total.

Since the New York State Gaming Commission does not report event-specific totals, we have estimated this amount based on sports bets made the week leading up to and including the date of the big game.

Investment Exposure to an Emerging Industry

Due to legalization, bets on football’s big game have grown 10 times larger over the last decade. A further shift away from bookies and toward legal operators appears to be likely. In September 2022, 89% of Americans said it was important to bet with a legal operator this NFL season, up from 76% in February 2022.

For legal operators, this could translate into revenue opportunities. Companies that take legal bets reported more than $62 million in revenue from the big game alone in 2022, a 37% jump from the prior year.

Looking for exposure to the growing sports betting industry? Explore Roundhill’s sports betting ETF, $BETZ.

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