N.S. tech company carries on in face of security probe, class action

·4 min read
Meta Materials Inc. of Dartmouth went public on the Nasdaq in 2021 after a reverse merger with Torchlight Energy Resources, a publicly traded Texas company. (Eric Thayer/Reuters - image credit)
Meta Materials Inc. of Dartmouth went public on the Nasdaq in 2021 after a reverse merger with Torchlight Energy Resources, a publicly traded Texas company. (Eric Thayer/Reuters - image credit)

A Nova Scotia advanced technology company trading on the Nasdaq is dismissing an investor lawsuit launched against it this week.

The class action filed Monday in a New York court accuses Dartmouth-based Meta Materials Inc. of making false and misleading claims about its products that inflated its share price.

Meta Materials stock has plunged since it began public trading last year from $16.77 in July to $2.48 on Thursday.

"These types of lawsuits are unfortunately a common occurrence for companies with stock listed on public exchanges in the United States," Mel Rusinak, manager of corporate affairs for Meta Materials, said in an email to CBC News.

"With the lawsuit having just been filed, it will be months before a lead plaintiff is appointed to represent the class and before we have an opportunity to respond.

"We believe the lawsuit is without merit and intend to vigorously defend against it."

None of the claims contained in the lawsuit has been tested in court.

Fadila Chater/The Canadian Press
Fadila Chater/The Canadian Press

The suit was filed by the Rosen Law Firm, which specializes in investor actions.

In the days following, other U.S. law firms have issued public calls for investors interested in joining the suit.

While the lawyers circle, company officials are showing off their wares this week at the giant Consumer Electronics Show in Las Vegas.

Meta Materials is developing advanced coatings that it says can make solar power more efficient, protect pilots from laser glare and improve the reception of 5G cellular signals when applied to windows on buildings. Meta Materials is also trying to develop wireless sensing medical devices.

The company disclosed in November that it is under investigation by the enforcement branch of the Securities and Exchange Commission.

Reverse merger

In September, it was served a subpoena ordering it to produce — among other things — documents and information relating to the deal that led to it going public on the Nasdaq.

"The company is co-operating and intends to continue to co-operate with the SEC's investigation," Meta said in its third-quarter report released Nov. 15.

It became listed after a reverse merger with publicly traded Texas company Torchlight Energy Resources. In a reverse merger, a private company buys out a public one, then has shares of the new business listed for public trading.

The SEC investigation disclosure was followed less than a month later by a blistering report from Miami investment firm Kerrisdale Capital. The firm is "shorting" the stock, meaning it makes money if the share price drops.

It described Meta as "a 'Photonics' company that's an optical illusion ... a $1-billion market cap company whose business is comprised of a whole lot of nothing: no real revenue, no promising technologies, undeveloped products, no track record of achievements."

Rusinak declined to respond to the claims in the Kerrisdale report.

N.S. made $100M

One investor has come out ahead.

When Meta Materials was listed on the Nasdaq in July — with a spike in share prices — Nova Scotia Crown corporation InnovaCorp sold its $3.1-million early investment in the company and made $104 million in profit.

In total, more than $20 million in various forms of government assistance to Meta Materials has been announced, mostly from federal agencies. However, not all projects have advanced.

In 2017, Sustainable Development Technology Canada approved $5.4 million in total funding "to develop a novel manufacturing process for nanostructured solar coatings in Halifax."

But the solar-powered vehicle technology project never got rolling. The agency told CBC News on Thursday that Meta Materials did not move forward and did not complete its first milestone.

"Other than a preliminary disbursement to kick off the project in 2018, the majority of the $5.4 million funding has not been provided to the company," spokesperson Janemary Banigan said in an email.

ACOA says company 'in good standing'

The Atlantic Canada Opportunities Agency has put in the most government money — $6.8 million.

It says each project undergoes rigorous due diligence.

"Meta Materials Inc. is in good standing with the agency. It would be inappropriate for ACOA to provide further comment," said ACOA spokesperson Jay Witherbee in a response to CBC News.

The Business Development Bank has also invested $5 million in Meta Materials through a convertible debenture that can be converted into shares.


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