Bright Minds Stock Rises Over 3,000% in Five Days

Psychedelic pharmaceutical company Bright Minds Biosciences Inc. (NASDAQ: DRUG) stock price rose 1,445% to close at $38.49 on Tuesday, while the stock rose $36 per share. The stock opened at $2.67 per share and has traded in the $1 to $2 range for most of the past year. But in the last five days it has moved more than 3,000%.

What’s unusual about this move is that the company had four million shares outstanding and 100 million shares traded. Before the move, the company only had a market cap of $14 million, but that increased to $171 million.

Bright Minds said in a press release that there were no known significant changes. The stock is already down around 17% in early trading today. Many biotech traders are calling the move a short squeeze, in which option holders are forced to enter the market and buy shares to cover their position. When traders with multiple options have no choice but to buy, the market creates an imbalance of too many buyers and too few sellers, driving the stock price ever higher.

For AdvisorShares ETF (NASDAQ: PSIL), Bright Minds’ portfolio weight changed by 59% due to the stock move. Portfolio manager Dan Ahrens spoke on the Dales Report after trading, noting the stock was also up 120% the day before. PSIL is an actively managed ETF as opposed to an ETF that tracks an index. He stated that he decided not to reduce any positions after the first day and let the stock continue to rise to see if it would rise.

As the stock continued to rise, Ahrens said he went on the hunt to find out what caused the price to rise. “We are looking for information. We initiate calls to the company. We look wherever we can find,” he said.

At the moment it seems to be a kind of game stop, said Ahrens

He added that there might be news in the next few days that would solve the mystery, if there is one.

Bright Minds last reported earnings in August Green market report wrote that the company was still in the pre-sales phase and had not brought any drugs to market. Some income was recently reported, but it was attributable to a tax credit. The company continued to look for investors and other possible sources of income.

Anthony Varrell, a commentator for The Dales Report, said in the interview: “If this happened without news, a stock doesn’t move like that unless someone knows something.” And if someone knew something and it did that, knock someone at the door.”