Last week the news broke that MindMed CEO J.R. Rahn had sold a significant portion of his MindMed shares. This announcement raised some pretty serious eyebrows in the psychedelic investment and MindMed communities, but with the release of an explanatory statement, the sale began to fade into the next news cycle.
That was until Friday when another insider and early investor, Bruce Linton, joined the dumping frenzy and sold almost half of his MindMed stock. This news re-ignited the concern and brought the issue back into the spotlight.
Two major insiders selling significant portions of their MindMed stock in the same week? Cause for concern? Let’s take a deeper look.
Not the first time MindMed CEO has sold shares
So first the numbers. Last week MindMed CEO J.R. Rahn sold approximately $24.7 million in company stock (6.45 million subordinate voting shares, 1.9 million options, and 727,187 restricted share units). Factoring in the various sales executed last week, the move represents a 38% sale of his current position in the company.
A significant enough move at any time, especially for the CEO, but this isn’t the first time Rahn has dumped a large number of shares. In January of this year, the CEO and co-founder sold approximately 20% of his shares, bringing the total position sold this year to just under 50% of his MindMed stake.
Add to this the news that MindMed advisor, board member, and early investor Bruce Linton has now sold approx 48% of his MindMed shares, just a few days after the CEO sold his…
And we just might, perhaps, maybe, have something to be concerned about.
Or there could be a perfectly rational explanation
An investor never wants to see insiders suddenly dumping half the stock of a company you’re invested in. It does not instill confidence in the long-term (or near-term) success of the company.
Is there bad news coming around the corner? Perhaps some less than impressive trial results? A negative email from the FDA?
Well, first of all, many of those scenarios (selling due to upcoming negative news) would flirt with insider trading violations and risk fines or even jail time. So some of these worst-case speculations are tempered by the risk of the SEC’s wrath.
So while we should be careful and use these moves as motivation to keep a more vigilant eye – there’s a decent chance that in the end, Ockhams’s Razor will prevail (the theory that the simplest explanation is usually the most likely).
When J.R. Rahn took his first big cut in January he gave several interviews explaining that it was nothing to be concerned about, that he, like many entrepreneurs, had been accumulating personal expenses, had taxes to pay, and that it was time to cash in and pay some bills (see minute 3:45 of this interview). In his words, Rahn had been financing much of MindMed’s early operations “on his credit card”.
And with the recent, bigger, stock sale, Rahn’s team released a statement saying that portions of the funds would be used to launch a charitable healthcare foundation in honor of his late mother “…he plans to use a portion of the proceeds to establish the Clara L. Rahn Foundation, named after his late mother who was a child psychologist.”
How much of the funds? We don’t know yet. Hopefully, this wasn’t a fluffy PR excuse. But following the transaction, Rahn still holds 5.3 million options, 2.0 million RSU’s, and 1.7 million subordinate voting shares – still about 50% of his original stake. So he’s still very much invested in the company’s success.
Was this just a personal finance move? Before the sale his stake in MindMed was worth approx $60 million, so, investor’s concern aside, it might be perfectly reasonable for him to diversify his personal portfolio and spread some risk instead of leaving nearly all his net worth in a volatile clinical-stage firm. Something that could help secure his personal and family’s future. You or I might have done the same.
Right now this is all the information we have, so for now, we’ll put away the speculation and wait for more news. The minute we hear anything new, you’ll be the first to know.
Last week the news broke that MindMed CEO J.R. Rahn had sold a significant portion of his MindMed shares. This announcement raised some pretty serious eyebrows in the psychedelic investment and MindMed communities, but with the release of an explanatory statement, the sale began to fade into the next news cycle.
That was until Friday when another insider and early investor, Bruce Linton, joined the dumping frenzy and sold almost half of his MindMed stock. This news re-ignited the concern and brought the issue back into the spotlight.
Two major insiders selling significant portions of their MindMed stock in the same week? Cause for concern? Let’s take a deeper look.
Not the first time MindMed CEO has sold shares
So first the numbers. Last week MindMed CEO J.R. Rahn sold approximately $24.7 million in company stock (6.45 million subordinate voting shares, 1.9 million options, and 727,187 restricted share units). Factoring in the various sales executed last week, the move represents a 38% sale of his current position in the company.
A significant enough move at any time, especially for the CEO, but this isn’t the first time Rahn has dumped a large number of shares. In January of this year, the CEO and co-founder sold approximately 20% of his shares, bringing the total position sold this year to just under 50% of his MindMed stake.
Add to this the news that MindMed advisor, board member, and early investor Bruce Linton has now sold approx 48% of his MindMed shares, just a few days after the CEO sold his…
And we just might, perhaps, maybe, have something to be concerned about.
Or there could be a perfectly rational explanation
An investor never wants to see insiders suddenly dumping half the stock of a company you’re invested in. It does not instill confidence in the long-term (or near-term) success of the company.
Is there bad news coming around the corner? Perhaps some less than impressive trial results? A negative email from the FDA?
Well, first of all, many of those scenarios (selling due to upcoming negative news) would flirt with insider trading violations and risk fines or even jail time. So some of these worst-case speculations are tempered by the risk of the SEC’s wrath.
So while we should be careful and use these moves as motivation to keep a more vigilant eye – there’s a decent chance that in the end, Ockhams’s Razor will prevail (the theory that the simplest explanation is usually the most likely).
When J.R. Rahn took his first big cut in January he gave several interviews explaining that it was nothing to be concerned about, that he, like many entrepreneurs, had been accumulating personal expenses, had taxes to pay, and that it was time to cash in and pay some bills (see minute 3:45 of this interview). In his words, Rahn had been financing much of MindMed’s early operations “on his credit card”.
And with the recent, bigger, stock sale, Rahn’s team released a statement saying that portions of the funds would be used to launch a charitable healthcare foundation in honor of his late mother “…he plans to use a portion of the proceeds to establish the Clara L. Rahn Foundation, named after his late mother who was a child psychologist.”
How much of the funds? We don’t know yet. Hopefully, this wasn’t a fluffy PR excuse. But following the transaction, Rahn still holds 5.3 million options, 2.0 million RSU’s, and 1.7 million subordinate voting shares – still about 50% of his original stake. So he’s still very much invested in the company’s success.
Was this just a personal finance move? Before the sale his stake in MindMed was worth approx $60 million, so, investor’s concern aside, it might be perfectly reasonable for him to diversify his personal portfolio and spread some risk instead of leaving nearly all his net worth in a volatile clinical-stage firm. Something that could help secure his personal and family’s future. You or I might have done the same.
Right now this is all the information we have, so for now, we’ll put away the speculation and wait for more news. The minute we hear anything new, you’ll be the first to know.