Torchlight Energy Resources effectively no longer exists following its June 28 merger with Meta Materials (NASDAQ:MMAT) stock. The news of a dividend payment, a reverse stock split of TRCH stock, and the business combination were enough to spike interest throughout June.
Meta Materials is a company that develops functional materials and nanocomposites. Torchlight Energy Resources was an oil & gas exploration firm that operated in Texas.
The synergies leading to the business combination are somewhat unclear. TRCH stock had long been considered an acquisition target. Yet the acquirer profile looked to be a larger oil E&P company.
Nevertheless, it seems that the terms of the deal were enough to entice shareholders to agree to the merger. Meta Materials shareholders are expected to own 75% of the combined company, while Torchlight shareholders get 25%. Torchlight CEO John Brda will remain with the new business combination while its oil & gas assets are disposed of.
The focal point moving forward for potential investors is whether Meta Materials makes sense as an investment. As a result of the combination, it has $160 million in cash with nearly zero debt. Ostensibly that cash will be directed toward materials development alone since its newly purchased oil assets are being sold.
Based on those assumptions, is MMAT stock worth establishing a position in?
A Closer Look at TRCH Stock
Meta Materials technology platform enables leading global brands to deliver breakthrough products to their customers in consumer electronics, 5G communications, health and wellness, aerospace, automotive, and clean energy.
It is apparent that it is attempting to further establish its position within health and wellness in particular. When it completed the business combination with Torchlight Energy Resources the accompanying press release noted that it would discuss recent events and future growth initiatives on July 6.
The company announced the conclusion of a 27-month project on July 6 that aims to commercialize a jointly-developed, non-invasive, glucose-sensing prototype.
Meta Materials led the project through its wholly-owned subsidiary, META. Its metamaterial films were an integral part of the project. They were proven to increase the transmissibility of normally weak glucose signals by 240%.
The project aims to commercialize the META glucoWISE Home Hub system. If successful, it could be a substantial leap forward in diabetes management, eliminating painful aspects of the process.
According to the press release, the company’s looking for more strategic partners to help get its products commercialized as well as ways to make glucoWISE more portable and app friendly.
It is safe to assume that Meta Materials will direct some of the $160 million in capital from the merger toward accelerating commercialization.
Peer Stocks
There are at least a few parallels between Meta Materials and Senseonics (NYSEAMERICAN:SENS). Senseonics is a diabetes management firm that is progressing toward the commercialization of an implantable glucose monitor. The difference is that Meta Materials’ solution is non-invasive.
Senseonics, like Meta Materials, realized a significant loss in Q1. It posted a $249.51 million net loss in the period. Meta Materials meanwhile posted a $CAD 55.08 million loss in Q1.
But remember, Meta Materials is nearly debt-free following the merger. So, if investors assume that it is going to focus primarily on the diabetes management sector then there are significant catalysts for shares.
The company didn’t elaborate on the commercialization timeline for glucoWISE products. They may or may not ever come to market, but that’s the bet here.
I’m fairly conservative when it comes to jumping into technology pre-commercialization. But that risk profile describes many other investors. For them, Meta Materials might provide big returns at current prices.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
