Why Is TRCH Stock Falling and Will It Go Back Up?

Torchlight Energy Resources (TRCH) has soared nearly 900 percent this year. However, the stock fell by 29 percent on June 22 and is down 36 percent from its 52-week high of $10.88 on June 21. Will TRCH stock go back up? Should you add this meme stock to your portfolio?

Once on the brink of bankruptcy, TRCH has taken advantage of its meme-stock status to raise around $250 million through equity offerings. Meme stocks have come into focus after WallStreetBets’ GameStop short squeeze earlier this year.

TRCH stock is down 27 percent on June 23 as of 10:28 a.m. ET. The stock has fallen significantly after the company raised its stock offering program. TRCH said that it intends to raise an additional $150 million on top of a $100 million stock offering announced last week.

Torchlight is being acquired by industrial materials manufacturer Metamaterial in an agreement that experts predict will result in the sale or hive off of its core operations. On June 21, Torchlight said that it extended the merger closing date from June 24 to June 30 to allow time to pay a special dividend of preferred stock.

The special dividend will be issued on a one-for-one basis to common stockholders of record on June 24. This means that TRCH investors will have to continue to hold the shares through June 24 to be eligible for the dividend. The dividend is expected to be paid out on June 25.

The short interest in TRCH stock has risen. According to Fintel, on June 22, over 59.9 million TRCH shares were sold short, which represents almost 27 percent of the volumes that day. On June 18, nearly 20 million TRCH shares were sold short. TRCH stock is expected to climb higher in the short term due to high short interest and the likelihood of a short squeeze from retail traders on Reddit message boards.

TRCH stock has risen by more than 1,800 percent over the last year and is outperforming the S&P 500. While TRCH stock is down over 36 percent from its 52-week high, it's still up 900 percent YTD.

TRCH stock is very popular on Reddit and there's a subreddit with around 8,500 members to discuss the stock. A post on Reddit, which was upvoted over 103 times, talked about a short squeeze in TRCH stock and set a target price of $20 for June 21 and $100 for June 22. Another post, which was upvoted more than 350 times, mentioned that Metamaterial stock would be worth $300–$500 in the next few years.

It’s difficult to predict how high TRCH stock can go in the short term because the stock price is driven by short squeezes and investor sentiments. Also, as we’ve witnessed with many stocks recently, all that's needed to skyrocket is a little momentum.

Torchlight, which reported a net loss of $2.1 million in the first quarter of 2021, has warned frequently that it has serious doubts about its ability to continue as a going concern.