Expect Volatility in Torchlight (TRCH) Stock as Merger Vote Nears

Torchlight Energy Resources is an oil and gas exploration company. Due to the changing investor and consumer sentiment in favor of renewable and green energy, Torchlight decided to shift its focus entirely. In December 2020, the company signed a definitive agreement with Canada’s Metamaterial for a merger. There have been a lot of delays in the shareholder vote. What's the TRCH-Metamaterial merger date?

Metamaterial designs and manufactures advanced materials and performance functional films that are engineered at the nanoscale to control light and other forms of energy. Its technology provides unique solutions for everything from solar to aircraft safety to wearable technology.

Torchlight CEO John Brda is excited about the merger. He said that as the shift happens in the marketplace, companies like Meta that are focusing on sustainable technologies are coming in at the right time.

Through this merger, Brda and TRCH wanted to unlock value potential from its national listing and access the capital markets. As a part of the deal, Metamaterial was to gain a listing on Nasdaq. Torchlight’s shareholders would gain access to the multi-billion-dollar markets that Metamaterial serves.

As part of the deal, Torchlight’s oil and gas assets will be sold off and the proceeds will be used to pay a special dividend to its existing shareholders. However, if the sale can't be completed within the stipulated time, Torchlight shareholders will be entitled to receive pro-rata equity interest in the spin-off entity that holds Torchlight’s remaining oil and gas assets.

The merger didn't turn out to be as simple as the companies might have envisioned. The initial shareholder vote for the proposed business combination was scheduled to happen on March 12. However, in view of the regulatory hurdles, the vote got delayed several times. The hurdles in the merger are understandable since it isn't a typical merger. First, neither of the companies have anything in common. Through this merger, Metamaterial will get a U.S. listing without having to go through an IPO.

Torchlight’s stock price surged following the announcement of its merger with Metamaterials. At one point, TRCH stock climbed by more than 600 percent in February from December 2020 due to investors’ enthusiasm regarding the merger. However, since then, the stock has declined by 24 percent.

On May 7, Torchlight put out a press release saying that a special meeting for the vote on the merger will be held virtually on June 11. Brda stated, “We are very excited to move into the final stages of this transaction, including the stockholder vote in connection with the transaction.” The company also mentioned that the preferred stock dividend record date will be determined based on the expected close of the transaction.

Following TRCH’s press release on the merger vote finally happening, its stock rose by 11 percent on May 7. As of the close on June 8, the stock price had climbed by nearly 70 percent since the closing price on May 6. The stock price has factored in a lot of upside already.

The announcement of the number of dividends from the sale of TRCH’s assets would be the next big catalyst for the stock. A merger now seems like more or less a done deal. If the merger vote is successful, Metamaterial will start trading on Nasdaq under the ticker symbol "MMAT." After the formal approval, shareholders could bid the price up on Metamaterial’s business prospects as well as the upside from the dividend offered to Torchlight’s existing shareholders.

On the other hand, there could be a downside as well immediately following the vote as investors follow the “buy the rumor, sell the news” adage. Whichever way the price goes, one thing is certain. There's going to be a lot of volatility in the stock price in the next few days. So, sit tight and enjoy the ride.