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Why Meta Materials Stock Dived by Nearly 40% Today

What happened

Meta Materials' (NASDAQ: MMAT) stock was far from a popular title on the market on Friday. In fact, shares of the next-generation materials purveyor plummeted just shy of 40%, in sharp contrast to the frothy gain of the S&P 500 index. Investors bailed on the stock following the announcement of a new round of capital raising.

So what

Meta Materials said that it has entered into a securities purchase agreement with "certain institutional investors" it did not name to sell just over 37 million shares of its common stock and an equal number of warrants. The price for the shares will be $1.35 per share, and the exercise price of the warrants is to be $1.75. The warrants become exercisable six months after issuance, and they expire five and a half years from issue.

Meta Materials' stock, which had closed Thursday at nearly $2 per share, unsurprisingly cratered the following day.

The company should reap around $50 million from the new issue, which it anticipates will close on or about next Tuesday, June 28.

The announcement of the stock and warrant flotation comes one week after Meta Materials announced its latest acquisition, that of specialty tech components maker Optodot, for $48.5 million. This was a cash-and-stock deal under which the acquirer agreed to pay $3.5 million in cash and the remaining $45 million in its common shares.

Now what

Although Meta Materials is actively expanding with a complementary asset, 37 million new shares comprise a relatively large pile for the company. According to data compiled by Yahoo! Finance, the company's share count is currently a shade over 347 million, making for quite a dilutive issue. Since Meta Materials' stock is already very low-priced, investors rightfully feared a big decline in the value of their holdings.

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Eric Volkman 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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