Thanks to the spectator who alerted me to this latest development in the ongoing saga of Dartmouth-based Meta Materials, the “smart” materials company that earned Nova Scotia’s erstwhile venture capital fund Innovacorp a $100 million payday by going public with a valuation north of $1 billion.
Meta Materials listed on the Nasdaq at the end of June 2021 by way of a reverse merger with Torchlight Resources. Torchlight, a struggling oil and gas company, became a meme stock with an “irrational” share price in the lead-up to the merger thanks, largely, to wild speculation about the value of a special dividend Torchlight shareholders would receive once the merged company sold off its oil and gas holdings.
Innovacorp VP Andrew Ray told me they sold their Meta shares over “about eight days in the first two weeks of July 2021,” when the price ranged from USD$6.00 to USD$3.80. Ray said they felt “there was a material component of the price related to the Torchlight special dividend and a lack of market consensus on its value” but Innovacorp believed “the market would ultimately determine the underlying value of the META stock.”
Since then, the market has not been overly generous in its valuation of Meta’s stock. In fact, on 25 August 2022, the company was notified by the Nasdaq that it was in noncompliance with the exchange’s $1 minimum price guideline and had 180 calendar days, or until 21 February 2023, to regain compliance. To do so, the Meta Materials price had to be at or above $1 for at least 10 consecutive business days during this 180-day period.
Meta met this requirement, its price trading consistently above $1 between November and December last year, but it fell below $1 again in February, particularly after its February 10 announcement that it would float a $100 million common stock offering. As of today (March 16), the stock has been trading below $1 for 28 consecutive business days and it seems likely Meta will receive another de-listing warning (warnings are issues when stocks have been trading below $1 for 30 consecutive business days).
In fact, as I write, on Tuesday morning (March 21), the stock is trading at roughly 53 cents per share.
In response to de-listing speculation, Meta Materials president and CEO George Palikaras took to Twitter to reassure investors:
Once again there are discussions on R/S. Look up my last response which still holds. There is not going to be an R/S for being below the threshold for as long as i am the CEO of $MMAT. My sources also say that @johnbrda & McCabe have ALL their shares intact. #KnowWhatYouHold🦋 pic.twitter.com/nQkrIa3m43
— George Palikaras (@palikaras) March 9, 2023
An R/S is a reverse stock split, defined by Investopedia as:
…a type of corporate action that consolidates the number of existing shares of stock into fewer (higher-priced) shares.
Reverse splits, the definition continues:
- can signal a company in distress since it raises the value of otherwise low-priced shares.
- Remaining relevant and avoiding being delisted are the most common reasons for corporations to pursue this strategy.
But as you can see, Palikaras has no intention of initiating a reverse split to remain relevant and avoid de-listing; instead, as he told his Twitter followers, Meta Materials will remain on the Nasdaq through a mix of:
Revenue, strategic partnerships, cost efficiencies, hiring & paying for performance, non-dilutive capital, poison pill, relentless work, Revenue… Plenty of time 2 get in compliance, but our bar is set a lot higher than that. Thank you 4 the support & patience.
Got that? No reverse split for Meta Materials! Also, “Revenue.”
But on March 15, Meta CEO and COO Ken Rice filed a Form-8K with the Securities and Exchange Commission disavowing Palikaras’ tweet:
Rice seems to be signalling there will be a reverse split in Meta Materials’ future no matter what his boss says.
Which is how the executives of totally normal companies always communicate with each other—via a combination of social media posts and SEC filings.
Flamethrower
Speaking of “totally normal,” I was going to end with a report on what former Torchlight CEO John Brda is up to these days, but it got too complicated to include in this week’s article, so we’ll catch up with him another day. Suffice to say that between forming a shareholders’ organization called “Flamethrower,” retaining two law firms to “investigate” the spin off of Next Bridge Hydrocarbons from Meta Materials and inspiring what amounts to his own FAQ from FINRA, he’s been busy.
Although personally, if I held any shares in Meta Materials or Next Bridge Hydrocarbons (NBH), I’d be more concerned right now by this risk factor contained in the February announcement of Meta’s planned $100 million share offering:
We may not be able to fully recover the $20 million owed to us by NBH.
Prior to the Spin-off, we loaned NBH an aggregate of $20 million for the operation of its oil and gas business. This amount, plus interest, is due March 31, 2023, unless NBH successfully raises $30 million or more in capital before such time through debt or equity or a combination thereof, in which case the maturity date of these loans will be extended to October 3, 2023 and the aggregate amounts due would be amortized in six equal monthly installments. If NBH is not able to raise sufficient funds to repay these loans, our financial condition and results of operations could be materially and adversely affected.
The question of what becomes of NBH if it is not able to raise sufficient funds to repay its loans is not answered, but would surely be of interest to Brda’s shareholders group.
The company might have been expected to address this issue in the webcast it was to host on March 17 to review Q4 and FY 2022 preliminary results, but it has rescheduled that event to “later in March” to allow Meta:
…the time required to complete the complex accounting analysis required for its Form 10-K filing related to the Next Bridge Hydrocarbons, Inc. share distribution completed on December 14, 2022, and the resulting deconsolidation of the Next Bridge Hydrocarbons, Inc. assets and liabilities.
The saga continues…
