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Why Torchlight Energy Resources Stock Plunged 26% in March

By Reuben Gregg Brewer - Apr 6, 2021 at 7:44AM

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Important company plans were delayed and investors didn't take kindly to the news. Here's what you need to know.

What happened

Shares of U.S exploration and production company Torchlight Energy Resources (TRCH) fell a painful 26% in March according to data from S&P Global Market Intelligence. That said, at one point they were actually higher by roughly 15%. The mood turned negative as an update about the company's proposed merger started to filter out.

So what

In mid-December 2020 Torchlight Energy and Metamaterial announced plans to merge. It's a complex deal that is, basically, a backdoor way for Canada-based Metamaterial to get a U.S. listing. In fact, once completed, the energy assets now owned by Torchlight are expected to be jettisoned, with the combined company focused on specialty materials. Still, there are incentives for Torchlight investors here, and a reason to be pleased with the somewhat unusual deal.  

Two men shaking hands in front of energy infrastructure.

Image source: Getty Images.

That said, in mid-March Torchlight announced that the planned merger was expected to be completed sometime in the second quarter. That materially pushes out the consummation date, which investors didn't seem to like very much. In fact, the stock drifted steadily lower after the news broke. Given the delay, some investors might be worried that the acquisition process isn't going as smoothly as originally hoped.  

Now what

Torchlight Energy is no longer just an energy stock. It's really a special situations play, which is a space that's probably only appropriate for more aggressive investors. The delay here could just be a timing issue or it could be more, but for most investors it would be best to sit on the sidelines until the deal is done. Or, if what you are really looking for is energy exposure, skip Torchlight Energy entirely.

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Stocks Mentioned

Torchlight Energy Resources, Inc. Stock Quote
Torchlight Energy Resources, Inc.
TRCH
Metamaterial Inc. Stock Quote
Metamaterial Inc.
MMAT.F

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