When the latest weekly assignment list came out from InvestorPlace, I volunteered to write about Meta Materials (NASDAQ:MMAT) and MMAT stock because the Canadian company’s office is mere minutes from my house in Halifax, Nova Scotia.
Other than that, I knew very little about the mysterious company that looks ready to take on the world. Heck, it even has a non-invasive glucose monitor that it’s developing called glucoWISE.
It’s got some tough competition in the specialty medical device sector, including at least one that has tie-ins with smartwatch technology and others that also offer similar no-finger prick diagnostics.
What could go wrong? Lots. Here’s why.
MMAT Stock Is a Penny Stock
MMAT stock closed last week below the $5 ceiling for penny stocks. In late June, the share price skyrocketed to almost $22 a piece, giving it a market capitalization of $6 billion in the blink of an eye. Days later, it had plunged to under $8, then below $3 in August.
Even hovering around the penny stock threshold, MMAT stock is overpriced by InvestorPlace contributor Mark Hake’s reckoning. My colleague wonders how a company with $11 million in sales and $75 million in cash is worth $1.5 billion. I have the same reservations.
Honestly, where this company is located in Dartmouth is hardly a beehive of activity. I know this because Meta Materials’ offices are a two-minute walk from an animal shelter I support in the city.
As a Canadian, I hope Meta Materials is successful. However, if you look at its history, I don’t know how it will break through and deliver actual revenues.
Its website’s leadership page is impressive. It has a large roster of upper and middle managers listed. I count 21, including CEO George Palikaras and his co-founder and chief science officer Themos Kallos. In addition, there are no less than 10 Ph.D.’s profiled.
Based on my colleague’s estimate of $11 million in sales, that’s $524,000 in sales for every manager.
Now, as you might be aware, Meta Materials became a public company at the end of June through a reverse merger with Torchlight Energy Resources. I don’t know if it’s just me, but it seems as though reverse mergers are happening a lot these days with companies that want to go public and have been scared off the SPAC (special purpose acquisition company) route.
Anyway, one of Meta Materials’ early investors caught my attention.
An Interesting Investor
Innovacorp invested $3 million in Meta between 2015 and 2021. Thanks to Meta going public, Innovacorp sold its shares in July, booking a $104 million gain on its investment. That’s a return of 35x its original investment.
“The Innovacorp team has a track record investing in disruptive technologies. With Innovacorp’s support, including incubation facilities, META was able to scale and launch its first metamaterial application,” stated Meta’s CEO in Innovacorp’s press release announcing its share sale.
“META is growing. We will soon move into our state-of-the-art 6,300-square-metre (68,000-sq.-ft.) facility in Dartmouth, and we appreciate the support from Innovacorp during the transition.”
It’s normal for early-stage venture capital firms to exit their positions after a lengthy hold. So, I don’t think you can fault them for the decision. Furthermore, Innovacorp is a Nova Scotia Crown corporation, that is, a business enterprise where the government has significant control. Its mission is to help early stage local companies commercialize their technologies for export markets. Anytime it can redeploy capital or move to somewhere else in the province, it’s a win for the people of Nova Scotia.
I’m one of those people, so I hope Innovacorp is sincere when it says it “continues to believe in Meta’s technology, market opportunities, and team.”
The Bottom Line
Meta was founded in 2011. It’s taken a decade to get to this point — $11 million in sales, most of it from its recent acquisition — so investors will have to be really patient if they want to see a big payoff down the road.
While I wouldn’t invest in MMAT stock, I do think it makes an interesting speculative play. Just not at $5. Maybe under $3. But if you’re at all risk-averse, I wouldn’t go anywhere near this business because it’s got a lot of great ideas but very little that it can turn into sales overnight.
That said. Good luck, Meta. I hope you make Nova Scotia proud.
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Read More: Penny Stocks — How to Profit Without Gettting Scammed
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.