SEC declines to confirm investigation of meme stock Meta Materials following 2022 trading halt.

Meta Materials, ⁤a functional materials and nanocomposites producer that became‌ a darling of ⁢the meme ‌stock community, may or may not be ‍under investigation by the Securities and Exchange Commission (SEC), says Chair Gary Gensler.

Late last year, Meta Materials⁣ was targeted ‍by retail investors after gaining the attention of meme traders. Shares rallied as much as⁣ 143 ⁢percent⁢ over three⁢ months, topping $2.

Heading into 2023, Meta Materials planned to spin off Next Bridge Hydrocarbons, a subsidiary the ​firm owned entirely. The entity informed the Financial Industry Regulatory Authority (FINRA) on Dec. 7 that it intended to convert its ⁢over-the-counter (OTC) Meta Materials preferred shares (MMTLP) to shares of what would eventually become Next Bridge. Meta announced a day later ‍that it​ received notice of a⁢ revision of the corporate action by FINRA.

FINRA halted trading of MMTLP on its ⁤OTC equities list on Dec. 9 and reopened it on Dec. 13. MMTLP‍ shares were canceled by the ‌issuer on Dec. 14.‍ Many traders were taken aback ​by the decision, ⁤with ​some asserting that Meta Materials had engaged in market manipulation amid elevated short interest.

FINRA issued a statement in March confirming that it did not cancel any MMTLP shares.

“FINRA did not cancel ⁣the‍ MMTLP shares. The issuer, Meta Materials, canceled the shares effective Dec. 14,” the regulatory ‍agency⁣ said.

“In fact, FINRA does not and cannot cancel any‍ securities that ​are issued ⁣by a ⁢company—this was an action of the⁣ issuer. However, just‌ as FINRA assigns symbols to unlisted ⁢securities,‌ FINRA also can unassign or‍ ‘delete’ a symbol, for example, where‌ it is no longer⁢ needed ⁢to quote or trade a security. In​ this case,​ FINRA deleted​ the MMTLP symbol on Dec. 13 in light of the imminent cancellation of the shares as⁤ announced by the company in connection with the Next‍ Bridge / MMTLP corporate action.”

In April, Meta announced that it would offer shares of its common stock and⁤ warrants⁤ to buy shares of its common stock in⁢ an underwritten public ⁤offering. The company⁢ said that it would use the net proceeds from the corporate action for working capital and general corporate purchases. ‌The underwritten public offering of more than 83 million shares was priced at $0.30 a share.

Mr. Gensler noted that the SEC and FINRA are ⁣separate organizations, and it did ‌not seek any advice, clarity, or permission to halt Meta Materials shares.

“The SEC’s role is to investigate many things in the capital​ markets. We ⁤don’t speak to specific investigations, but we do on a regular basis, ‌examine them raw for compliance with their rules and examine them ⁤on a regular basis,” Mr. Gensler said during a Senate Banking Committee hearing on ⁣Sept. 12.

While​ the ⁤SEC is aware of what happened surrounding Meta Materials, Mr. Gensler asserted that he cannot speak to any specific investigation to protect the financial markets.

After a⁤ bumpy start to 2023, Meta Materials’ performance in the second quarter deteriorated. On⁢ a year-over-year basis, revenues plunged 39 ‍percent, net income plummeted 1,300 percent, and diluted earnings per share declined 829 percent. Net profit⁤ margin was down an astounding 2,200 percent.