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Why Torchlight Energy Stock Fell 28% in Early Trading Today

By Reuben Gregg Brewer – Jun 23, 2021 at 12:38PM

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The hits keep coming at Torchlight Energy, but the company has little to do with the crazy price action these days.

What happened

Shares of energy company Torchlight Energy Resources (TRCH) fell as much as 28% in the first 90 minutes of trading on June 23. That follows on losses of around 25% from the previous trading day. And yet the shares are still up some 600% or so since the start of the year. This is not normal trading action.

So what

Oil and natural gas prices were higher in early trading today, so today's drop isn't related to the commodities that underpin Torchlight Energy's business. And while Torchlight is in the middle of a merger with Canada's Metamaterial, the last news on that front came out on June 21. So that's not likely the issue today. Which leaves one last option: Reddit message boards, which have taken up Torchlight as a so-called meme stock. 

A person holding their head with a candlestick chart heading lower in the background.

Image source: Getty Images.

The ups and downs of meme stocks are frighteningly dramatic and unpredictable. Today is just one more example of the extreme volatility being caused by this speculative group of traders. And in Torchlight Energy's case, that's on top of a very complex merger deal with Metamaterial, which is basically just looking to get a U.S. listing. In fact, after the deal is fully consummated, the plan is for the combined entity to jettison Torchlight Energy's energy operations. The complexity of this agreement is part of the reason Reddit message boards have been attracted to the stock, but at this point any fundamental underpinning to the stock moves is likely gone -- emotion is the name of the game right now. 

Now what

Long-term investors buy a stock to benefit from the long-term growth of a company, not in the hope that they can sell the stock at a higher price to someone else and make a quick buck (profiting from what is often called the greater fool theory). Right now, with Torchlight Energy, investors should probably be watching the madness and popular delusions of the speculative class safely from the sidelines. 

Reuben Gregg Brewer 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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