A word of caution for those who may be experiencing unease regarding a possible market correction on the horizon.
This is not financial advice, but rather a sharing of my own thought process in this respect.
As with any investment situation, a market correction should only be of concern if trading or investing shorter term. In the less short term, mid term and long term, corrections mean close to nothing, and trying to time them, you'll get it wrong more often than not, IMO. With Incannex, the consequences of getting it wrong at this juncture would be tragic: missing out on the kind of returns I expect to see with this stock over the next 8 weeks, and then again in the 3 months that follow those 8 weeks, would be a very harsh way to learn the lesson of not trying to time the market.
How might IHL fare?
Specifically now with Incannex's current situation, I believe the concern to be mostly irrelevant. In the short term, even a significant market correction probably will only slightly reduce the significant rerate most holders, the company and its partners are all solidly expecting. In other words, and in my opinion, the main risk is the possibility of a slightly reduced upside, short term, not downside.
The biotech sector is traditionally much less affected by market corrections than tech, services, resources and commodity sectors are, and the sector can even grow during overall market corrections. IF there is a correction in the next three months, that is the baseline of relative resiliency upon which to set one's expectations, IMO. But specifically, if a correction eventuates, all IHL holders will be faced with the same question I'm pondering here: should I sell given the value proposition of the stock for the short and mid term future? I expect the answer to that to be a resounding "NO" for the vast majority of holders, even as the rest of the market may drop around us. In fact, I used to consider IHL the best value proposition on the ASX: with the imminent planned NASDAQ listing, I consider IHL is one of the best value propositions one could hope for globally, short, mid and long term. I believe US investors and institutions will start to catch on too as IPO time approaches, even if the market undergoes a correction.
How did IHL fare during the massive covid-induced correction of 2020? From February to April, it lost about 20% of its SP value but then rapidly climbed to all new highs 20% above it's pre-covid valuation by mid-April, while the down turn persisted for several more months for most sectors. I could not even truly attribute the price movements specifically to the covid market downturn, as company-specific news flow was mostly sufficient to explain the peaks and troughs in my view.
US Listing
I don't want to be afraid to look at the worst case scenario (and conveniently it isn't that bad). The company may decide to abort the US listing temporarily due to adverse market conditions caused by a correction. But I personally rate this as improbable. Incannex obviously views gaining exposure to the American market as integral to the path of the company, and rightly so. I consider a downturn would have to be very significant to cause them to even consider delaying their plans, and if they do consider it, a polling of the market would probably reveal that there remains significant interest in the IPO in the US, regardless of what the market is doing, for the reasons already outlined above. On the off-chance they do postpone the US listing, not only would this be a short term setback, but the upcoming news flow regarding clinical trials provides multiple reasons to view the US listing as inconsequential in a decision of what to do short term. For traders, different story, of course, but even if I were a trader, I'd be going long on IHL right now and don't really have any helpful thoughts for anyone who might be stubborn enough to day trade IHL at the moment.
Trying to time the hypothetical of a postponed listing is doubly tricky, when compared to the already foolhardy choice to try to time the market itself. After all, if Incannex announces a postponement, they could reverse it just a week later, based on evolving market conditions. The potential for temporary volatility would be significant, and one should not kid oneself: selling in an attempt to profit from that volatility would be rolling the dice against what are, all things considered, pretty steep odds.
The bottom line is, the company is obviously strongly committed to the US listing strategy and will only push out their preferred, rapid timeline, if forced to. When IXHL goes live on the NASDAQ, there isn't a single observer I've come across who does not consider Incannex will start to rerate to close the gap between its current ASX-based, paltry valuation, and the valuations of its peers on the US market. Even if this happens to be timed with a very large correction (which pundits are not forecasting BTW), and IHL-comparable companies in the US lose 30% of their value, Incannex still arguably has the runway to more than double in market cap in order to even start approaching fair US market value among its peers there. And of course it would then presumably climb out of any potential downturn with them.
NB: I won't weigh in on the probability of a correction in the next 30-60 days. Much smarter and macro-economically minded people will try to forecast that and will get it wrong. The point is, I believe I don't need to worry about a correction with my IHL position, for the reasons above.
Good luck to all holders, new and longer term: very exciting times.
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