Meta Materials (NASDAQ:MMAT) stock is in the spotlight after the company was charged with violating “the antifraud, reporting, internal accounting controls, and books and records provisions of the federal securities laws.” Meta has agreed to settle the charges with a $1 million fine without admitting or denying the wrongdoings.
In addition, the U.S. Securities and Exchange Commission (SEC) also charged former Meta Materials CEOs John Brda and Georgios Palikaras with market manipulation, fraud and other charges. The charges pertain to the merger of Brda’s Torchlight Energy Resources and Palikaras’ Metamaterials and how the two individuals raised $137.5 million before the merger in an at-the-market (ATM) offering.
According to the complaint, Brda and Palikaras engaged in a manipulative scheme that involved issuing a preferred stock dividend ahead of the merger.
The SEC claims that Brda and Palikaras “hinted via social media” and informed certain investors and consultants that the dividend would influence short sellers to cover their position, which would lead to a short squeeze and a higher stock price.
MMAT Stock: Meta Materials to Pay $1 Million to Settle Federal Securities Violations
Additionally, the SEC notes that Brda and Palikaras “misrepresented the company’s efforts to sell its oil and gas assets and distribute proceeds to preferred stockholders, giving investors a false impression of the value of the dividend.”
While MMAT stock was receiving hype from the dividend announcement, the two individuals took advantage of the attention and elevated prices with a $137.5 million ATM offering. Shortly after the offering, Brda allegedly informed Palikaras that they had two days “to take advantage of the squeeze.”
The SEC seeks permanent injunctions, bans from being a director or executive officer and civil penalties for Brda and Palikaras. In addition, the SEC has ordered Brda to return any profits obtained illegally.
“This conduct is particularly alarming because it involves public company CEOs who were more concerned with ‘burning the shorts’ than creating long-term value for shareholders,” said the SEC’s Eric Werner.
Meanwhile, the SEC’s investigation into MMTLP is still in the works. Anyone with beneficial information is encouraged to submit their findings to SEC.gov.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Eddie Pan did not hold (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.
