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Here's Why Torchlight Energy Resources Stock Skyrocketed Today

By Joe Tenebruso - Jun 21, 2021 at 5:52PM

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The exploration and production company will pay a special dividend to its investors ahead of its upcoming merger.

What happened

Shares of Torchlight Energy Resources (TRCH) soared 58% on Monday after the oil and gas driller extended the closing date of its merger with advanced materials manufacturer Metamaterial.

So what

Torchlight and Metamaterial agreed to push back the transaction date to June 30. This will give Torchlight enough time to pay its shareholders the special dividend it announced on June 14. 

An upwardly sloping stock chart.

Torchlight Energy Resources' stock price has surged in recent days. Image source: Getty Images.

Torchlight's common stockholders who own shares at the close of the June 24 record date will receive one share of Series A preferred stock for every share of common stock they own. The preferred stock will entitle investors to a portion of the proceeds the combined company receives from the planned sale of its oil and gas assets. 

Torchlight intends to pay the special dividend on June 25. 

Now what

Torchlight has garnered attention from traders on Reddit and other social media platforms. Some of these traders are hoping to ignite a short squeeze by driving up the stock's price and forcing short-sellers to exit their positions. Their goal is to cause so much pain for short-sellers that they rush to buy back the shares they shorted, which could help accelerate the steep rise in the stock's price. 

Still, although short squeezes can create sharp upward moves, they also tend to be short-lived. And when a squeeze ends, investors who bought late in the rally can often suffer sizable losses.

 

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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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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