Source: Kokhanchikov / Shutterstock.com
The highly anticipated Meta-materials (NASDAQ:MMAT) spin-off took an unexpected turn. For weeks, investors have been waiting for updates on the company’s plans to create Next Bridge Hydrocarbons, a wholly owned subsidiary. Meta planned to accomplish this by converting its Meta Materials Preferred Shares (OTCMKTS:MMTLP) to the shares of what would become Next Bridge.
Yesterday, the company released a statement confirming that the Financial Industry Regulatory Authority (FINRA) had been notified of its action on the companies regarding the share exchange. But today FINRA shocked retail traders around the world by halting trading in MMTLP shares ahead of the spin-off. This news has left investors with pressing questions.
What’s going on with MMTLP stocks?
FINRA confirmed this morning the halt to trading on its list of over-the-counter stocks. It received the U3 stop code, indicating that it predates a significant event. In this case, it is the Next Bridge Hydrocarbons spin-off, an event that promises to generate high trading volume upon its completion. While MMAT is down today, the fallout will likely help boost it when Next Bridge Hydrocarbons officially replaces MMTLP stock. As InvestorPlace Associate News Editor Eddie Pan reports:
“MMTLP shareholders should perform adequate due diligence on this situation, as the preferred shares will cease trading on the over-the-counter (OTC) market following the split. Newly received Next Bridge shares will also not be tradable, nor will they be eligible for electronic transfers through clearing houses.
Pan also notes that the taping date is set for December 12, with a release date of December 14. Until today, everything seemed to be going according to plan.
Ever since FINRA imposed a trading halt, retail investors have expressed their anger. Some have accused the organization of market manipulation while others have boasted short-term interest levels. Many traders have called for legal action against FINRA and have resorted to tagging market influencers such as Elon Musk and AMC Entertainment (NYSE:CMA) CEO Adam Aron. But so far, the actions all seem to be honest, with no illegal activities. According to FINRA rules:
“FINRA may impose a halt to trading and listing of an OTC equity security pursuant to Rule 6440(a)(3) when FINRA determines, in its discretion, based on the facts and circumstances of the particular event, that halting trading in the security is the appropriate mechanism to protect investors and ensure a fair and orderly market.
It should also be noted that FINRA’s actions are not new. Imposing a trading halt in anticipation of a major market event is commonplace, as the Corporate Finance Institute explains. In fact, this is one of the most common reasons for a trade stoppage. FINRA clearly believes that it is necessary to halt trading in order to protect the interests of current investors. Retail traders may not be happy with the outcome, but it appears FINRA is well within its rights to cease trading ahead of a significant market event.
What happens after
At this time, it is impossible to predict when and if trading will resume. What we do know is that shutting down trading shouldn’t derail Meta Materials spinoff plans. According to a statement released by FINRA earlier today, the ticker symbol MMTLP will be phased out on December 13, a day before the distribution date.
At the date of publication, Samuel O’Brient held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.