Tens of thousands of concerned investors have flooded Congress with letters demanding answers to what exactly happened surrounding Meta Materials Series A preferred shares, also known as MMTLP.
Dozens of congressional representatives, including Rep. Ralph Norman (R-S.C.), penned a letter to Securities and Exchange Commission (SEC) Chair Gary Gensler and Financial Industry Regulatory Authority (FINA) president and CEO Robert Cook, requesting that they review the circumstances regarding the merger between Meta Materials and Torchlight Energy Resources and the subsequent spinoff of a new company called Next Bridge Hydrocarbons.
FINRA halted trading on Meta Materials’ stock and prevented shareholders from making trades.
“Since the halt, constituent investors have contacted members of Congress regarding the spin-off transaction and the subsequent halt on trading. Specifically, we have received more than 40,000 letters from concerned investors,” the letter stated. “Many of our constituents have concerns regarding the circumstances surrounding the U3 halt and level of short selling in MMTLP.” (A U3 halt refers to an extraordinary event having to do with settlement and clearance of trades.)
Congressmen presented the financial regulators with 16 questions and inquiries, such as a timeline of MMTLP trades on the over-the-counter (OTC) markets, how many questions and complaints FINRA and the SEC have received regarding MMTLP, and if there is any “evidence to suggest the existence of fraud and manipulation related to MMTLP transactions,” like naked shorts and counterfeit shares.
“We believe it is appropriate that FINRA and the SEC review these market events and determine what, if any, wrongdoing may have occurred in order to dispel misinformation and properly safeguard investors,” the letter said.
The board of directors at Meta Materials, an advanced materials and nanocomposites producer, issued an in-depth Dec. 8 statement addressing some of the most pressing shareholders’ concerns. The company noted that some of the claims and substantiated theories lobbed against the firm occurred when George Palikaris was CEO from the organization’s inception to October 2023.
SEC, FINRA Comment on Meta Materials
In March, FINRA commented on the events surrounding Meta Materials, writing that the regulator did not cancel any MMTLP shares but rather it was MMTLP that “canceled the shares effective Dec. 14.” It noted that FINRA officials could not cancel securities issued by companies, but regulators can unassign or delete securities symbols.“In this case, FINRA deleted the MMTLP symbol on Dec. 13 in light of the imminent cancellation of the shares as announced by the company in connection with the Next Bridge / MMTLP corporate action,” FINRA said in a statement.
During a Senate Finance Committee hearing in September, Mr. Gensler was asked for additional information about what transpired. He did not provide clarity on the matter, noting that “we don’t speak to specific investigations.”
At a House Financial Services Committee hearing, Rep. Norman directed a series of questions to Mr. Gensler. While the SEC chief was aware of Meta Materials, he could not answer some of the congressman’s specifics, including if he knew of the stock’s aggregate share count as of Dec. 8, 2022.
Updates on the Stock
Meta Materials shares are still trading on the Nasdaq Composite Index. The stock has cratered more than 93 percent year to date, to around $0.07 a share. The company possesses a market capitalization rate of approximately $40 million.Earlier this month, the company confirmed that it would hold a reverse stock split that might be necessary to maintain its Nasdaq listing. In addition, Meta Materials says that a reverse split would be needed to bolster the number of authorized shares, which would support the corporate objective of facilitating technology manufacturing, production, and sales.
“We have received a lot of feedback from investors with respect to the reverse split proposal,” said Jack Harding, Meta Materials’ chairman of the board, in a statement. “We have sought to address shareholder concerns and queries, hereby clarifying the necessity for the reverse stock split.”
In November, Meta Materials announced restructuring efforts that would result in annualized cost savings of as much as $30 million. Moreover, Jim Fusaro was appointed the new CEO, although he was replaced a month later by CFO and COO Uzi Sasson after departing over health concerns.
The third-quarter earnings report produced promising financial results, including a quarter-over-quarter revenue increase, lower operating expenses, and positive guidance.
“We still have work to do in 2023 and beyond, but third-quarter results are pointing in the right direction. We have identified the building blocks necessary to make the business more efficient. We’ve overcome many difficult challenges: product innovation, assessing market metrics and advanced product development efforts,” noted Mr. Sasson. “Now we need to translate that into sales across our core product lines, while continuing cost cutting efforts. Our remaining issues are addressable, and they have known solutions. It may take a little time, but our goal is clear.”
