Here’s from the company’s Next Bridge prospectus. Rather than simply delist the preferred shares and fold the assets into its equity, management added language that severely restricts the rights of external shareholders. The company was taken to court by its shareholders and eventually settled the suit for $13 million. In 2019, a similar case involving AmTrust Financial Services caused its preferred shares to essentially disappear during its $3 billion go-private deal in 2018. The most worrying issue, however, is the way the firm has treated its external stakeholders.Ĭonsider Meta Materials’ “deletion” of preferred shares. Its auditors have issued a “ going concern” audit qualification. Meta Materials’ legacy oil & gas business produces scant economic value, and 86% of the parent’s development revenues are derived from a single customer. The company’s weak fundamentals only add to the concern. Every $50 million in new equity now dilutes existing shareholders by 11%, assuming the pain is spread evenly. And capital raises are far harder now that shares are in the $1.25 range. By pursuing too many projects across at least seven different areas, the company has stretched itself thin with little success to show. Meanwhile, Meta Materials’ management has done the opposite. No matter which industry they’re in, skilled CEOs will realize that capital raises are best used to fund specific ends. And Tesla’s (NASDAQ: TSLA) Elon Musk has pulled the same trick masterfully to fund his Gigafactories. AMC Entertainment (NYSE: AMC) boss Adam Aron used high share prices to raise $6.2 billion and pay off debt, saving his firm from bankruptcy. Other CEOs tend to be more judicious with cash from capital raises. The money raised from their upsized reverse merger with Torchlight could now run out by this spring. Research & development (R&D) firms are notorious for their high capital requirements, and Meta Materials’ executives have been spending cash as if good times will never end. Since its 2021 reverse merger, the firm’s top brass has embarked on a massive spending spree, burning through an average of $34 million every quarter while avoiding capital raises.įrom a managerial standpoint, this is troubling. Meta Materials’ management, however, hasn’t helped the situation. In other words, investors who lost money on Meta Materials were likely either 1) using faulty information designed to manipulate markets, or 2) following other momentum investors who were fooled by the first point. Shares would eventually peak at over $12. The four conspirators would later allegedly sell at prices up to $3.63 over the following week just as momentum traders and social media watchers began to swarm in. They would proceed to “promote false information about Meta itself (e.g., that it was worth ‘north of $4.8 billion’) and promoted the purported benefits of the merger.” According to the SEC complaint, four defendants bought around 800,000 shares of Torchlight at prices between $1.68 to $1.95 in February 2021. 13, federal prosecutors and the SEC accused several online influencers of running a $100 million pump-and-dump scheme that included alleged market manipulation in the precursor to Meta Materials, Torchlight Energy Resources (TRCH). Because if you’ve lost money on Meta Materials, there’s a good chance it’s someone else’s fault. What should bagholders now do with Meta Materials stock? Meta Materials Stock: The Making of a Hustleįirst, a little background. MMAT stock is down 50% for the year and almost 94% below its 2021 peak. Special language in the Next Bridge prospectus essentially awards virtually all rights of the spinoff to the company’s insiders. InvestorPlace - Stock Market News, Stock Advice & Trading TipsĮven Meta Material common shareholders don’t have much to celebrate. There’s no easy way to offload them, and blaming FINRA barely makes anyone happier. To them, their preferred stock (which was trading at $12.50 less than a month ago) is now worth about as much as the hoard of stuffed animals sitting in my attic. It’s easy to pin blame on FINRA for halting trading in MMTLP stock in the days before the transaction.īut try telling that to anyone who owned preferred MMTLP stock. Meta Materials maintains full control of Next Bridge’s 134,000 acres of West Texas oil, so little has changed at the enterprise level. In a single stroke, they converted the firm’s entire listed block of preferred MMTLP shares into untradeable common stock of Next Bridge Hydrocarbons, Inc.Īt first glance, the transaction seems like moving cash from one pocket into another. Last Wednesday, executives at Meta Materials (NASDAQ: MMAT) finalized a bizarre transaction.
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