Retail investors, eager to make a quick profit, glossed over the many unknowns and shady details, including the true value of Torchlight’s Texas land (or even whether it actually existed), and swallowed the story pitched by Radar7382 hook, line, and sinker. Interestingly enough, Radar7382 was followed by a Stocktwits account that seemed to be owned by George Palikaras himself.īut did this raise the eyebrows of retail investors who wondered whether there might be some connection between the two people? Like perhaps maybe were they the same guy? Or was Radar7382 a friend of George, perhaps the investor relations man for Metamaterials? Of course not! None of this mattered! Any potential connection between Palikaras and Radar7382 was a feature, not a bug! Meanwhile, on Stocktwits-a platform sort of like Twitter, but focused on stocks-an anonymous poster going by the handle Radar7382 was pumping the merger relentlessly.ĭay in and out throughout early 2021, Radar7382 posted on the Stocktwits message board for Torchlight Energy lauding the business combination and speculating on the value that Wall Street was apparently missing. The idea that Tesla and Metamaterials might be working together drove expectations among investors sky-high, and they gobbled up all the shares they could afford. Indeed, the Torchlight-Metamaterials community went absolutely nuts when Palikaras posted a picture on Twitter and tagged Elon Musk, CEO of Tesla. Nor did the weasel-faced CEO of Metamaterials, George Palikaras, dispute these rumors. This was probably because both companies had no offices in Halifax and simply used the address to receive mail, and yet this alternative-and entirely more rational-explanation did not deter retail investors in the slightest, who concluded that the two companies were secretly working together. On a Reddit board dedicated to the merger, some enterprising researchers discovered a connection between the address for Metamaterials in Halifax, Nova Scotia, and a listed address for red-hot electric vehicle maker Tesla, Inc. Sounds too good to be true, right? The Pump…Īs news of the merger spread, social media platforms like Twitter and Stocktwits churned out misinformation and hype about the deal. Just imagine-investing $800 and getting $5,000 back! The low trading price of Torchlight's shares-often under a dollar in late 2021-proved irresistible to unsophisticated investors.Īt 80 cents a share, the prospect of buying 1,000 shares for $800 and potentially receiving a $5/share dividend seemed like an incredible bargain. The key part of the deal that attracted the attention of retail investors was the disposition of Torchlight’s single asset-potentially oil-rich Texas land that, when sold, would grant shareholders in Torchlight a “special dividend.” In the case of the Torchlight-Metamaterials combination, Metamaterials sought to gain access to the NASDAQ stock exchange by merging with Torchlight, which was a failing company already listed on the NASDAQ.Įffectively this meant Metamaterials became a NASDAQ-listed company without having to go through the traditional Initial Public Offering (IPO) process.īecause the process doesn't involve the same level of regulatory scrutiny and due diligence as an IPO, investors can be exposed to greater risks.Ĭonsequently, regulatory bodies like the Securities and Exchange Commission (SEC) have issued warnings about the potential dangers of investing in reverse-merger transactions.ĭespite these red flags, however, the SEC approved the Torchlight-Metamaterials merger in 2021. Over the years, reverse mergers have gained notoriety for being associated with fraud, lack of financial transparency, and other unethical practices. would have been a crazy tale its own right.īut now that news of the financially disastrous merger has attracted the attention of investigative journalist James O’Keefe of Project Veritas infamy, things are surely bound to get a whole lot wilder still. If things had played out as they always do in these situations, the story of the merger between Torchlight and Metamaterials, Inc. What followed was a rollercoaster of events that exemplify the dangers of speculative trading manias in the era of social media. With bank accounts fattened by pandemic benefits and PPP loans, retail investors dove into penny stocks, handed over their money to blank-check companies called SPACs, and tried to “squeeze the shorts” by investing in dead-end companies like AMC Entertainment (AMC), Gamestop (GME), and Bead Bath and Beyond (BBBY).Īmidst this financial Wild West, a Texas company named Torchlight Energy Resources announced a reverse merger with Canadian company called Metamaterials, Inc.
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