Last week, Meta Materials (NASDAQ:MMAT) received some bad news from the U.S. Securities and Exchange Commission in the form of a Wells Notice. According to a new 8-K filing, on July 20, 2023, the regulatory agency alerted Meta Materials that it has reason to believe that the company has violated federal securities laws. MMAT stock is down nearly 7% as of this writing as investors digest the pending proceedings.
What does this mean for Meta Materials? Let’s take a closer look at the 8-K filing and assess what investors should be expecting.
What’s Happening with MMAT Stock
The 8-K filing states that the SEC has issued a Wells Notice to Meta Materials as well as current CEO George Palikaras and former CEO John Brda. The notices are related to a SEC investigation that, among other things, concerns the merger of Torchlight Energy Resources and Meta Materials. The filing further states:
“The Wells Notices each state that the SEC staff has made a preliminary determination to recommend that the SEC file a civil enforcement action against the recipients alleging violations of certain provisions of the U.S. federal securities laws. Specifically, the Wells Notice received by the Company states that the proposed action would allege violations of Section 17(a) of the Securities Act; Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Exchange Act of 1934 and Rules 10b-5 and 14a-9 thereunder; and Regulation FD.”
For further context, Section 17(a) of the Securities Act of 1933 “makes it unlawful to ’employ any device, scheme, or artifice to defraud’, ‘obtain money or property’ by using material misstatements or omissions, or to ‘engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.’”
Cornell Law School notes that it is closely linked to Section 10b of the Securities Exchange Act of 1934 and SEC Rule 10b-5, both of which are often employed by investors making claims of fraud.
Why It Matters
Granted, a Wells Notice doesn’t mean that the SEC will file any charges. It also doesn’t mean that the SEC has determined wrongdoing on behalf of Meta Materials, Palikaras and Brda. The 8-K filing does say that SEC staff has recommended a civil enforcement action against the Wells Notice recipients.
MMAT stock has declined almost 80% over the past six months and is currently trading at 21 cents per share. It doesn’t seem like it has much more room to fall.
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On the date of publication, Samuel O’Brient 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.
