Based in Vancouver, TMC The Metals Company (NASDAQ:TMC) has inserted itself into the electric vehicle (EV) story without ever showing off an EV prototype. Instead, TMC stock offers investors the opportunity to cash in on the need for metals.
Specifically, the metals needed for battery production are at the heart of EVs. But the twist? TMC will be mining these materials from the seabed.
The newly listed TMC stock closed as high as $12.45 in mid-September before sinking. No doubt, the story here sounds compelling. Metals like nickel and copper are a must-have for EV batteries and they are in limited supply through traditional mining. So, scooping up the metals from the seafloor seems like a no-brainer. But you should think carefully before considering TMC, even at the current discount. The company is facing legal challenges, environmentalists are up in arms and it is years away from scaling up to production.
TMC Stock: SPAC Problems and Courtroom Woes
TMC was formerly known as DeepGreen Metals. The new company was created via a merger with a special purpose acquisition company (SPAC) called Sustainable Opportunities Acquisition. On its first day of trading, TMC stock was off to a promising start with a $9.41 close. Then it quickly went even higher.
However, this company has since run into a big problem. As part of the SPAC process, TMC was counting on institutional investors for $330 million in funding to start work. Now it turns out that some of those investors have balked at delivering their promised cash. One — Ramas Capital Management — has failed to deliver $200 million. TMC is now suing to force Ramas to follow through with its funding. However, the Financial Post reports that, at this point, the company has received only $30 million of the expected total cash.
Considering the company has already said it would be three years before it is able to generate revenue, this is a big problem. And we’re seeing the market concern in the sliding value of TMC stock.
But that’s not all — The Metals Company isn’t only in the courtroom because it’s suing institutional investors. The company is now also on the receiving end of investor legal action.
This latest trouble kicked off when Bonitas Research released a critical report on Oct. 6. The report alleged TMC had overpaid for exploration licenses, with unnamed insiders benefiting. TMC stock dropped on the news. On Oct. 20, a law firm announced that it is now investigating the company for potential securities laws violations.
Environmental Backlash
As if legal issues and funding challenges weren’t bad enough, TMC’s plans to mine nodules of nickel sulfate, cobalt sulfate, copper and manganese from the seafloor are also meeting strong opposition from environmentalists.
For example, well-known environmentalist and media personality Sir David Attenborough has publicly called for a moratorium on all deep-sea mining. In an interview, Attenborough told The Guardian:
“Mining means destruction and in this case it means the destruction of an ecosystem about which we know pathetically little.”
In the same article, noted marine biologist Helen Scales said the following:
“It is hard to imagine how seabed mines could feasibly operate without devastating species and ecosystems.”
The need for these metals may ultimately prevail over environmental concerns, but a battle is shaping up. Even if deep-sea mining companies like TMC ultimately win, the cost of extraction may rise if new regulations are imposed to protect the environment. That means yet another obstacle for TMC stock to overcome.
Bottom Line on TMC stock
So, the bottom line on this Portfolio Grader “F” rated stock? I’d stay away. TMC stock paints a compelling picture at first, but its current situation is messy. It has been tarnished with meme stock status, major investors have failed to deliver on funding, production is at least three years out and the company been the subject of a critical short-seller report. Now, on top of all of that, it faces the prospect of an investor lawsuit.
There may come a day when TMC is making a killing selling deep-ocean metals to EV makers. But at this point, the odds seem stacked against it. I’d give TMC stock a pass — at least until the company shows signs of getting its house in order.
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On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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