Meta Materials Enters Into An ATM Equity Sales Agreement

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Meta Materials (NASDAQ:MMAT) announced that it entered into an at-the-market equity income agreement. This is in-line pinch my anticipation that location would beryllium a Q1 2023 equity offering due to Meta's precocious complaint of rate burn.

Along with nan offering, Meta disclosed preliminary Q4 2022 results that were connected nan disappointing side. Meta's revenues decreased compared to Q4 2021 (which was nan first 4th pinch Nanotech revenue) while its rate pain for nan 4th was connected nan precocious extremity of my estimates. Meta's integrated gross maturation looks to person been reasonably minimal successful 2022 astatine astir 2% integrated maturation compared to 2021.

Meta's situation is that it has truthful acold generated overmuch much liking successful its products from unit investors than from existent firm customers. It will request to get much customers and commencement driving important integrated gross growth earlier unit investors get tired of nan company.

Notes On Products

Meta is progressive successful rather a fewer different areas, but truthful acold its nano-optic information business (Nanotech) provides astir of its revenues and astir of that gross comes from a azygous customer. Another area that Meta appears to beryllium focusing connected is batteries. For example, it entered into a Memorandum of Understanding pinch Mitsubishi Electric Europe and DuPont Teijin Films to scheme to scale a manufacturing system utilizing Meta's PLASMAfusion technology. The artillery conception is thing that has imaginable for Meta, but it still has a batch of activity to do to person customers that its solutions are cost-effective and tin supply important benefits.

Sluggish Revenue Growth

Meta appears to beryllium having challenges delivering important integrated gross growth. Meta's year-over-year gross comparisons benefited successful erstwhile quarters from its Nanotech acquisition, which closed early successful Q4 2021 and accounts for nan mostly of its revenue. Q4 2022 is nan first 4th wherever location is Nanotech gross successful nan comparison 4th from past year.

Meta reported astir $1.4 cardinal successful full gross successful Q4 2022 compared to $2.289 cardinal successful full gross successful Q4 2021, truthful location appears to beryllium a astir 35% to 40% year-over-year gross decline.

I judge this ample diminution successful year-over-year gross is mostly owed to nan timing of gross recognition, fixed that astir of Meta's revenues travel from 1 customer.

Thus location astir apt isn't a existent inclination of declining revenues, but location is besides small successful nan measurement of integrated growth. Meta antecedently noted that if it had acquired Nanotech astatine nan opening of 2021, it would person reported $10 cardinal revenues for 2021.

Meta's Proforma Revenues

Meta's Proforma Revenues (Meta's 2021 10-K)

Meta estimates it will extremity 2022 pinch $10.2 cardinal successful full revenue, which is astir 2% integrated gross growth.

High Rate Of Cash Burn

Meta reported having $11.8 cardinal successful cash, rate equivalents and short-term investments astatine nan extremity of 2022. This is down from $32.2 cardinal astatine nan extremity of Q3 2022, indicating rate pain of $20.4 cardinal during Q4 2022. This complaint of rate pain was a spot worse than I expected, arsenic I had estimated that Meta would person $15 cardinal to $20 cardinal successful rate pain successful Q4 2022.

A akin ($20 cardinal per quarter) complaint of rate pain successful Q1 2023 would person resulted successful Meta moving retired of rate by precocious February unless it received repayment of nan $20 cardinal that it loaned to Next Bridge and/or Meta's warrants (with an workout value of $1.75 per share) were exercised successful capable quantities.

Meta's stock value has been nether $1.75 since nan warrants became exercisable, and Next Bridge doesn't look to beryllium successful a position to repay Meta backmost yet. Thus location is nan request for nan at-the-market equity offering to raise costs earlier Meta runs retired of cash.

At-The-Market Equity Offering

Meta entered into an statement for a $100 cardinal at-the-market equity offering. As portion of nan offering, shares will beryllium sold connected nan unfastened marketplace from clip to time. Meta tin besides take to waste little than $100 cardinal successful shares and tin take really quickly nan stock income occur.

However, fixed that its rate pain complaint whitethorn still beryllium astir $20 cardinal per quarter, I'd expect it will want to waste capable shares to raise astatine slightest $7 cardinal per month. A faster complaint of stock income will thief summation its rate connected manus beyond minimum levels arsenic well.

If Meta ends up trading $100 cardinal worthy of shares astatine $0.85 per share, it would extremity up pinch astir 480 cardinal outstanding communal shares. At an mean of $0.70 per stock this would summation to astir 505 cardinal communal shares.

Meta's Potential Share Count

Meta's Potential Share Count (Meta's 424B5 Filing)

Meta besides has options, warrants and restricted and deferred banal units that could adhd to its outstanding stock count. If its outstanding banal options (from its equity inducement plan) are each exercised, that would adhd astir $27 cardinal rate for Meta and different 33.6 cardinal shares. There are besides astir 10 cardinal shares of banal issuable upon nan vesting of its RSUs and nan redemption of its DSUs.

Other Issuable Shares

Other Issuable Shares (Meta's 424B5 Filing)

Thus Meta could extremity up pinch astir $124 cardinal successful further rate (net of commissions) and astir 524 cardinal to 549 cardinal shares outstanding (if it completes nan ATM equity offering astatine an mean waste value of $0.70 to $0.85 per share). That would springiness it astir six further quarters of runway astatine its Q4 2022 pain rate. Getting nan $20 cardinal indebtedness repaid by Next Bridge Hydrocarbons would adhd different 4th to its runway (taking it to Q4 2024).

Notes On Valuation

Even astatine $0.69 per share, Meta looks to person a reasonably lofty valuation fixed its constricted integrated gross growth. At that stock value and 549 cardinal outstanding shares, Meta's endeavor worth would beryllium astir 25x its 2022 revenue. This is rather a precocious aggregate for a institution that generated only 2% integrated gross maturation successful 2022.

Meta's passionate unit pursuing whitethorn support its banal from sinking excessively further little for now, but Meta needs to present overmuch much successful position of business results. If it gets done 2023 pinch a continued precocious complaint of rate pain mixed pinch constricted integrated gross growth, it will apt request to do a reverse divided to support its listing.


Meta Materials is looking to raise money done a $100 cardinal at-the-market equity offering. This is in-line pinch my erstwhile expectations that it would request to raise money successful Q1 2023.

Meta's Q4 2022 revenues were disappointing, pinch a 35% to 40% estimated alteration successful revenues compared to Q4 2021. This alteration was apt owed to gross nickname timing, but wide its integrated gross maturation was only 2% successful 2022.

A precocious complaint of rate pain tin beryllium sometimes overlooked if location is besides a precocious complaint of integrated gross growth. A precocious complaint of rate pain mixed pinch minimal integrated gross maturation is much problematic though, and Meta will request to commencement making advancement successful 1 aliases some of those areas soon earlier investors get tired of waiting.

Editor's Note: This article covers 1 aliases much microcap stocks. Please beryllium alert of nan risks associated pinch these stocks.

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Editor: Naga

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