It was a meme stock. And once in a while that turns out OK. But when it comes to today’s Meta Materials (NASDAQ:MMAT), carrying the torch for MMAT stock looks like a sure way for investors to get burned. Let me explain.
Not every stock receives a second chance, let alone a third meaningful opportunity. And that’s probably truer of stocks which have made a name for themselves vis-à-vis Reddit’s notorious ape trading community.
For every meme-based GameStop (NYSE:GME) or AMC (NYSE:AMC) which have seen unexpected and real value added to their stocks through short-squeeze trading schemes, there’s plenty more largely forgotten tickers like Sundial Growers (NASDAQ:SNDL), Nano Dimensions (NASDAQ:NNDM) and others. And that’s not a good look for bullish investors to own.
MMAT Stock Is Different
Strikingly, MMAT stock is somewhat different than both groups. And until recently that was working in Meta Materials favor. Today though, an 0-3 strike count is carrying bearish heat, which would-be investors considering a purchase of MMAT shouldn’t ignore.
Unlike the SNDL or NNDM stocks of the meme universe that soared in early 2021 but have largely continued to trade into deep and prolonged bear markets, MMAT surged in late June.
A rally of nearly 250% in just six trading sessions preceded MMAT’s reverse takeover of publicly-traded oil and gas play Torchlight Energy. Moreover, shares scorched Torchlight stock’s relative February high of $9.66 and even 2013’s all-time-high of $13.50 before setting a new high of $21.76.
To say Redditors were hot for the pending deal was an understatement. But the obvious hit quickly turned into Meta Material’s first strike.
In equally fast and much more furious stock action, MMAT’s to-be-wed Torchlight gave up its entire rally over seven sessions straight into the reverse takeover deal’s completion on June 30. Shares traded as low as $6.31 and pennies from the rally’s starting point on June 11 before bouncing to close at $7.49.
A Frenzy to Exit
The second strike against a purchase of the smart materials and photonics outfit is the frenzied exiting of MMAT stock also occurred despite (or maybe due to) a 1-for-2 reverse stock split.
Virtually all reverse splits are decisions to ensure a stock can maintain exchange listing requirements. And most often, the behind-the-scenes levers are pulled when shares are trading below 50 cents or a buck for a prolonged period of time. But that hasn’t been the case for MMAT. And that’s troubling.
The failure to support the sleight of hand trickery appears to suggest apes, despite their poor reading skills, see the writing on the wall for shares sporting a much higher price tag and valuation removed from typical reverse split levels. Bananas? Not quite.
MMAT Stock Daily Price Chart
Source: Charts by TradingView
The third strike and why carrying the torch for MMAT stock is probably a bad idea is Meta Materials is an expensive concept company, or pricey enough venture at around $1 billion, where even positive news can’t lift shares. Even if investors fancy themselves contrarians, the bearish price action isn’t the sort to ignore.
To be fair, I get it. On the surface, the future sounds bright for this cutting-edge, industrial materials maker. Even better, Meta Materials just completed a 27-month U.K.-based prototype process for its non-invasive glucose monitoring system.
Should the glucose project make it through to the commercialization stage, the rewards could be huge. Great, right? But realistically, the attached “if” is likely even larger.
Bottom line, even if Meta Materials executes flawlessly, anything resembling marketable success is still years away. And respectfully, today the only thing bears like more than honey is a sweet short. As much, with MMAT stock lacking clear crowd and technical support to impede the bears’ progress, bullish investors are best advised to stay away.
On the date of publication, Chris Tyler does not hold (either directly or indirectly) positions in any securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.