MMAT - Meta Materials (MMAT) Stock Plummets on Public Offering Announcement
2023-04-14 14:22:41 ET
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Amid a corrective backdrop in the equities market, materials and nanocomposite manufacturer Meta Materials (NASDAQ: MMAT ) increased pessimism exponentially. After management announced the pricing of its previously proposed underwritten public offering, MMAT stock fell 42% before paring losses slightly to 40% down. With a significant number of warrants involved in the deal , the dilutive potential scared off investors.
According to MarketWatch , the Nova Scotia-based advanced materials firm stated before the opening bell Friday that it will be “…offering 83.3 million shares of common stock and warrants to buy up to 83.3 million more shares at a combined public offering price of 30 cents per share and accompanying warrant.”
In addition, “[e]ach warrant is exercisable at a price of 37.5 cents per share and will expire in five years. The offering is expected to close on Tuesday and net about $25 million in proceeds, before underwriting discount and estimated expenses.”
Also, underwriters will receive a 30-day overallotment option to purchase up to an additional 12.5 million shares at a discount. Not liking the terms of the deal, stakeholders quickly dumped MMAT stock.
Dilution Fears Drive Volatility for MMAT Stock
Absent any other market-related context, Meta Materials represents a fundamentally critical and relevant business. Meta specializes in holography and lithography and which can facilitate greater efficiencies for myriad industries. These sectors include aerospace, automotive, consumer electronics, 5G, and more. Nevertheless, MMAT stock must make financial sense for stakeholders. Unfortunately, the enterprise doesn’t appear particularly viable.
Primarily, the concerns of the deal center on dilution . According to Investopedia, unlike options, “…warrants are dilutive. When an investor exercises their warrant, they receive newly issued stock, rather than already-outstanding stock. Warrants tend to have much longer periods between issue and expiration than options, of years rather than months.”
The issuance of warrants may also bring up speculation as to why management would incur dilution for MMAT stock. On paper, the Corporate Finance Institute states that the “…warrant represents a potential source of capital in the future when the company needs to raise additional capital without offering other bonds or stock.”
Unfortunately, investors may perceive the public offering of MMAT stock as a desperation move, hence the sharp selloff.
Why It Matters
Not adding confidence to the matter is Meta Materials’ financial profile.
According to Gurufocus, MMAT stock incurs several warnings . Among them, the investment resource identified a buildup of inventory. Also, its Altman Z-Score slipped to 1.74, reflecting distress and possible bankruptcy risk in the next two years.
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 risk.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto 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 .
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
More From InvestorPlace
- Buy This $5 Stock BEFORE This Apple Project Goes Live
- The Best $1 Investment You Can Make Today
- It doesn’t matter if you have $500 or $5 million. Do this now.
- Massive Bear Market “Divergence Event” Ahead… And The #1 Way to Play It
The post Meta Materials (MMAT) Stock Plummets on Public Offering Announcement appeared first on InvestorPlace .