Shareholders accused FINRA of orchestrating a bailout for short-sellers and broker dealers.įINRA has never explained the “extraordinary event” behind the halt, but a simple reason could be the communication breakdown: FINRA realized that brokers and their customers didn’t understand its message about when trading on MMTLP would stop. Then, on December 9, FINRA issued a rare “U3” trading halt due to what it called an “extraordinary event.” The dramatic intervention effectively stopped trading of the stock forever. But even that statement has been subject to interpretation. “What I can say though is MMTLP as of the end of trading on the 12th will no longer be on the OTC markets,” he said in a December 7 interview on Trader TV. In a widely circulated video, OTC Markets Groups’ Jeff Mendl didn’t seem to know when trading would end either. There was widespread confusion about whether MMTLP would continue trading until December 12 or halt on December 8. That approval came on December 6, but in a bizarre twist, FINRA’s announcement left uncertain the date for the cutoff in MMTLP trading. In November, Meta Materials announced that the distribution of MMTLP shares to Next Bridge had been approved by its board and would take place on December 14, pending FINRA’s okay. What’s not in dispute is the controversy kicked up by subsequent events. Still, the reasons for this sudden uptick are, like just about everything else in this story, a matter of debate. MMTLP shares would soon be exchanged for stock in a new company, Next Bridge Hydrocarbons, that wouldn’t be publicly traded.Īccording to shareholders, that meant a reckoning for short-sellers - and they believed there were tons of them. ![]() Traders had caught wind of Meta Materials’ strategy. It topped out at $12.26 on November 22, implying a market cap of over $2 billion. But in October, MMTLP’s price skyrocketed. “MMTLP was never designed to trade,” he reiterated to Forbes.įor the next year, shares of the never-designed-to-trade MMTLP hovered in the range of $1.50. ![]() It came as a shock to Torchlight’s former CEO, John Brda, who told Forbes he was caught off guard and was less than thrilled with the turn of events. (Different rules govern marketplaces like Nasdaq and the New York Stock Exchange, according to securities lawyers who spoke with Forbes.) If a security, in this case a preferred dividend share class, has a nine-digit identifying number called a CUSIP, a market-maker can register it with the OTC and begin selling. Ut guess what? In one of the surprising lessons that MMTLP has taught us, it’s possible for a security to trade on the OTC market without the involvement of the company. Meta Materials said as much in a July 2021 SEC filing. What was obvious from the beginning was that this special dividend wasn’t supposed to trade. Or, without a sale, it could morph into shares of a new company. It could have been a cash payment if Meta Materials found someone willing to buy Torchlight’s Orogrande drilling rights. Where the money for that dividend would come from wasn’t immediately clear. Rather, it was meant as a placeholder for a future dividend. What's obvious is that MMTLP is a symptom of a larger disease. The logo the MMTLP community is using on website and in Twitter profiles. This financial innovation was later dubbed MMTLP. Torchlight’s shareholders received a 25% cut along with something special: a novel mechanism for spinning off the Torchlight assets into an untradeable security that short-sellers couldn’t get their grubby mitts on. Metamaterial got Torchlight’s coveted spot on the Nasdaq exchange and 75% of the new company, Meta Materials (ticker: MMAT). ![]() The marriage to Metamaterial was more transactional than corporate synergy. Four years later, Torchlight bought 172,000 acres in Texas’ Orogrande Basin, southwest of the more productive Permian Basin, and subsequently claimed it could potentially extract oil worth 2,700 times what it paid for the land. Torchlight started life in 2010 as Pole Perfect Studios, a business that catered to the decade’s fad of pole dancing for fitness. It was born in December 2020 with the merger of Canadian tech company Metamaterial and the Plano, Texas-based Torchlight Energy Resources. The upshot was a security backed by an optimistic estimate of West Texas oil reserves that was never supposed to trade being bought up on an over-the-counter marketplace by investors who had beef against short-sellers and a regulatory agency that ended up calling the whole thing off, circumventing possible panic selling but leaving shareholders with nothing.
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