What happened

Shares of Mind Medicine (MNMD 1.98%), a clinical-stage biopharmaceutical company using psychedelics to treat brain disorders, rose 12.9% on Monday, only to fall back down later in the day. The stock closed at $0.8474 on Friday and then opened at $0.9450 on Monday, climbing to a high of $0.955 in the first hour of trading. The stock fell back down to $0.761 around 2 p.m. ET before rising a little to $0.8347 at the close.

MindMed's shares have a 52-week low of $0.5300 and a 52-week high of $2.97. The company's shares are still down more than 39% this year.

What happened

The lift started on Friday when a Financial Times story related that meme stock trader Jake Freeman, a 20-year-old student at University of Southern California, and his uncle, Dr. Scott Freeman, who run Freeman Capital Management, have bought their way into a 5.6% stake of the biotech company. Dr. Freeman, who was one of the co-founders of MindMed, said in a letter dated Aug. 11 that he was proposing a value enhancement plan to cut costs and get prospective MindMed therapies more quickly to market.

Freeman Capital Management has been in the news after netting $105 million to $110 million from a $25 million purchase and subsequent sell-off of meme stock Bed Bath and Beyond.

There is also a big factor that will affect the stock. Trading at below $1, the stock is facing the possibility of being delisted from the Nasdaq. That would obviously hurt its ability to raise capital, so the company's board of directors approved a 1-for-15 reverse split to take place on Aug. 26. Reverse splits are not viewed that favorably by investors because they devalue the stock and emphasize that a company is having difficulty.

Now what

MindMed is an extremely volatile, risky stock right now. It's hard to see where it's going until after the reverse split settles in. On top of that, the company has no revenue, so though it has trimmed its losses, it is still losing money every quarter, including $17.1 million in the second quarter. Its cash position as of June 30 was reported as $105.7 million, down from $133.1 million at the end of last year.

Buying this stock with the hope it will get another ride, like meme stock Bed Bath and Beyond, is tricky, to say the least. However, MindMed could be a good long-term buy for risk-adverse investors who are willing to hold for a few years until the company actually has a marketed drug.