Source: Kokhanchikov / Shutterstock.com
The highly anticipated Meta Materials (NASDAQ:MMAT) spinoff has taken an unexpected turn. For weeks, investors have been waiting for updates on the company’s plans to spin off Next Bridge Hydrocarbons, a subsidiary that the company owns in full. Meta planned on accomplishing this by converting its Meta Materials Preferred Shares (OTCMKTS:MMTLP) to shares of what would become Next Bridge.
Yesterday, the company released a statement confirming that the Financial Industry Regulatory Authority (FINRA) had received notice of its corporate action regarding the share exchange. But today, FINRA shocked retail traders everywhere as it halted trading of MMTLP stock ahead of the spinoff. This news has left investors with some pressing questions.
What’s Happening With MMTLP Stock?
FINRA confirmed the trading halt this morning on its over-the-counter equities list. It has been given the halt code U3, indicating that it pre-dates a significant event. In this case, it is the Next Bridge Hydrocarbons spinoff, an event that promises to generate high trading volume upon its completion. While MMAT is down today, the spinoff will likely help boost it when Next Bridge Hydrocarbons officially replaces MMTLP stock. As InvestorPlace Assistant News Writer Eddie Pan reports:
“MMTLP shareholders should conduct adequate due diligence on this situation, as the preferred shares will cease to trade on the over-the-counter (OTC) market following the spinoff. The newly received Next Bridge shares will not be tradable either, nor are they eligible for electronic transfers through clearing corporations.”
Pan also notes that the date of record is scheduled for Dec. 12, with a distribution date of Dec. 14. Until today, everything seemed to be going according to plan.
Since FINRA imposed the trading halt, though, retail investors have been voicing their anger. Some have accused the organization of market manipulation while others have touted the levels of short interest. Many traders have called for a lawsuit against FINRA and have resorted to tagging market influencers such as Elon Musk and AMC Entertainment (NYSE:AMC) CEO Adam Aron. But so far, the actions all seem to be above board, with no illegal activities. Per the FINRA rulebook:
“FINRA may impose a trading and quotation halt in an OTC Equity Security pursuant to Rule 6440(a)(3) where FINRA determines, in its discretion, based on the facts and circumstances of the particular event, that halting trading in the security is the appropriate mechanism to protect investors and ensure a fair and orderly marketplace.”
It’s also worth noting that FINRA’s actions are nothing new. Imposing a trading halt in anticipation of an important market event is commonplace, as the Corporate Finance Institute explains. In fact, it is among the most common reasons for a trading halt. FINRA clearly believes it is necessary to halt trading in order to protect the interests of current investors. Retail traders may not be happy with the result, but it seems that FINRA is well within its rights to cease trading ahead of an important market event.
What Comes Next
As of now, it’s impossible to predict when and if trading will resume. What we do know is that the trading halt should not derail Meta Materials’ spinoff plans. According to a statement released by FINRA earlier today, the MMTLP stock trading symbol will be deleted on Dec. 13, one day before the distribution date.
On the date of publication, Samuel O’Brient 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.