Why Torchlight Energy Stock Tanked 18% at the Open Today


What happened

Shares of exploration and production company Torchlight Energy (NASDAQ:TRCH) fell a quick 18% when trading opened on April 16. The big news was an after-the-close update on April 15 discussing the U.S. energy company’s complex merger agreement with Canada’s Metameterial (OTC:MMAT.F).    

So what

The deal between Torchlight and Metamaterial isn’t your typical merger. It is, effectively, a way for Metamaterial to get a U.S. listing without having to go through an initial public offering. Indeed, as the company’s name implies, it does not drill for oil and gas, but operates in the materials space. Following the merger it will be looking to jettison Torchlight’s energy assets. 

People walking in the atrium of an office building.

Image source: Getty Images.

That said, the consummation of this deal hasn’t gone smoothly. On March 15 Torchlight announced that it had to push out the expected closing time frame for the deal, which led to a quick decline in the share price. Now, just one month later, it has again announced that it is pushing back a key deadline for the deal. Not surprisingly, Investors reacted the same way, pushing the stock lower.  

Now what

Most investors will probably want to sit on the sidelines here given the unusual nature of the Torchlight/Metamaterial deal. The ongoing delays, meanwhile, just make the situation that much more uncertain. In the end, it’s probably best to wait until the two companies get this acquisition over the finish line so investors can get a full picture of what the combined company looks like when it comes out the other side.

READ:  3 Energy Stocks to Buy Now

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/04/16/why-torchlight-energy-stock-tanked-18-at-the-open/

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