In other Innovacorp news, the US Securities and Exchange Commission has subpoenaed Meta Materials in connection with its merger with Torchlight Energy (with thanks to the spectator who alerted me to this development).
Meta Materials was Innovacorp’s first “unicorn” investment — that is, its first portfolio company to list on the Nasdaq with a valuation of $1 billion (plus).
I explored all the weird aspects of that listing — a reverse takeover that was hyped on social media, earning it the title of “meme stock” — back in September, but now it seems the SEC is also taking a closer look at it.
News of the subpoena was found in Meta Materials’ 10-Q filing for the quarter ended September 30. According to Investopedia, all public companies trading in the US are required to file 10-Q forms for each of the first three quarters of their fiscal years in which they disclose “relevant information regarding their finances as a result of their business operations.”
The reference to the subpoena was in Part II– Other Information:
In September 2021, the Company received a subpoena from the Securities and Exchange Commission, Division of Enforcement, in a matter captioned In the Matter of Torchlight Energy Resources, Inc. The subpoena requests that the Company produces certain documents and information related to, among other things, the merger involving Torchlight Energy Resources, Inc. and Metamaterial Inc. The Company is cooperating and intends to continue to cooperate with the SEC’s investigation. The Company can offer no assurances as to the outcome of this investigation or its potential effect, if any, on the Company or its results of operation.
In response to news of the subpoena becoming public, Meta Materials founder and CEO George Palikaras took to Twitter to reassure investors:
Business as usual. IMO we are in full compliance with SEC regulations. Now that management is off the black out period, I will be adding to my personal position. $MMAT 🦋#GoBeyond Q3 Updates: https://t.co/RP2VFUg9Hr
— George Palikaras (@palikaras) November 16, 2021
A “blackout period” is the period before a company’s earnings announcements, during which certain people are prohibited from buying or selling company shares. (The SEC doesn’t actually prohibit this but most listed companies do, to prevent suspicion of insider trading.)
Earnings
Meta reported a net loss of $11.42 million in Q3, compared to a net loss of $2.58 million a year earlier. For the first nine months of 2021, the company reported a net loss of $61.46 million — including a one-time $40.54 million loss on financial instruments.
Palikaras, in his letter to shareholders, attributes this to Meta’s (or META’s) status as “an early growth stage” company.
The company’s cash holdings, thanks to its Nasdaq listing, totaled $140 million as at September 30, although, as Seeking Alpha noted, the firm spent $72 million of this in October to acquire Nanotech Security.
The company doesn’t attract much analyst interest. A handful of publications reported on the subpoena and a few others noted that Meta’s 2021 year-to-date revenues, at $1.8 million, are well short of the projections contained in a March 23 Schedule 14 A filing by Torchlight Energy:
In the absence of analyst interest, there are heated discussions in online forums, but I am not sophisticated enough to distinguish valuable insight from utter nonsense, so will not be commenting on the value of Meta as an investment.
(I really don’t know. Those who are bullish point to its impressive catalog of intellectual property — 35 patents issued and 20 pending in the US, 121 issued and 74 pending in 23 other countries. Those who are more skeptical point out that it has been in business for a decade with little other than patents to show for it.)
My interest in Meta is in the circumstances under which it went public and I will be very interested to see what the SEC has to say about those circumstances.
