Similar to Cannabis Capital Market Structure: Horizons ETFs CEO on Psychedelics Industry
By Shadd Dales On Mar 12, 2021
Horizons ETFs made waves when they launched the world's first psychedelics stock index ETF PSYK on the NEO Exchange early this year. The Dales Report sat down with Steve Hawkins, the President and CEO of Horizons ETFs for an interview, to learn a little bit more about the behind-the-scenes on creating an ETF like this from scratch, what investors should know, and where the psychedelics industry – and others – might be headed.
Here's a few of the highlights from the interview.
Psychedelics Potentially An Investment Opportunity Similar to Cannabis
Hawkins says that while the cannabis industry tends to be focused on the recreational abilities, currently many psychedelics companies are looking at medical, therapeutic routes. Creating the psychedelics ETF was touchy due to the sensitivity over the potential illegality of the product.
But Health Canada and the FDA loosening some of the strings on therapeutic testing is creating an environment that has what Hawking believes is "great promise, ultimately." With over 700 million people worldwide suffering from some form of mental illness including depression and addiction, many of these may be treatable by different therapies – and only really one needs to get to market before a huge boom of investor interest follows.
Right now, Hawkings says, the psychedelics industry resembles cannabis in capital market structure. There's very few companies in the space, but with big IPOs, and multiple US companies that are looking at moving into Canadian space.
Solactive AG and the Psychedelics Companies Indexed in PSYK
PSYK is Horizon's index, and Hawkins said that in the years since the creation of their Horizons Marijuana Life Sciences Index ETF (HMMJ), there's been many lessons learned. The HMMJ Index, he says, is owned by Solactive, and that Solactive therefore does all the back end work in determining the companies that are part of the index. With PSYK, Horizons wanted to retain more control, and they maintain their own index committee. That said, PSYK is still a passive index as well, and there is no active decision-making involved in determining the companies that are part of the index; rather, these are in part determined by float market cap weights, trading volume and the like.
Hawkins did want PSYK to be third-party calculated, so Solactive AG remains as calculation agent.
Volatility Something to Be Expected
Many of the companies in the psychedelics space are what Hawkins calls "micro-cap companies" who don't even meet the definition of small-cap. Compared to multi-billion dollar market cap cannabis stocks like Aphria, Aurora, and Canopy, many of those stocks are going up and down 5% nearly every day. Applied to a 50-75 million dollar cap psychedelic company, volatility is just something to be expected. Investing in this space, Hawkins says "is not for the faint of heart. You got to make your play, you got to be committed, and then you just got to hold on real tight, and sometimes close your eyes."
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Shadd Dales
Shadd Dales is the Founder and President of The Dales Report and has an extensive background in the business media industry.
His work translates into over 15 years in mainstream media that included roles with BNN Bloomberg, CTV Properties and the iHeart Radio Network.
Shadd is considered one of the leading on air talents in both the cannabis and psychedelic space and has interviewed some of the most notable CEO names in the industry.
Shadd's vision is to establish a content platform that is equivalent to a mainstream broadcast produced in a format that is relevant for today's investor.