Challenging Wall Street Journal’s Coverage of MMTLP: A Demand for Balance, Transparency, and Justice

Dear Alexander Osipovich & Wall Street Journal,

We at Fair Markets Now, a community-driven advocacy group committed to promoting free and fair equity markets for retail traders, write in response to the Wall Street Journal’s recent article, “How the Stock Ticker MMTLP Became an Anti-Wall Street Rallying Cry.” While we appreciate the attention given to the MMTLP issue, this article fails to fully capture the depth of the situation and the grave concerns of the retail investors involved.

Firstly, the Wall Street Journal’s article does not discuss a crucial point: MMTLP was never intended for public trading. This preferred share dividend was given to Torchlight Energy Resources (TRCH) holders after its merger with Meta Materials Inc (MMAT).

It symbolized an ownership right to a perpetual lease on a remarkable 134,000-acre property in the Texas Basin, which is affluent with minerals and natural gas and represents the most significant onshore oil discovery in the last half-century. It was explicitly linked to interests in an oil and gas project spanning 134,000 contiguous gross acres in the Orogrande Basin in Hudspeth County, West Texas.

However, MMTLP became the subject of unauthorized trading on the OTC market without the consent of the issuing company. This inappropriate trading caused considerable confusion and injustice among the 65,000 shareholders who legitimately held these preferred dividends, expecting value realization from the enormous oil assets previously controlled by Torchlight. The article’s omission of this critical detail is a significant oversight that detracts from the depth and complexity of the MMTLP issue.

This raises a critical question: How could a preferred share dividend be tradable without the issuing company’s consent? Even when the issuing company complained, the trading continued. What was the purpose for market makers to allow a preferred share dividend to trade in the first place? What could that move have allowed them to do? These questions suggest a deeper issue at play that warrants further investigation and scrutiny from Congress. That is the rallying cry from retail that regulators have absolved their role in policing the markets.

Secondly, The Wall Street Journal article does not mention that MMTLP was on the OTC Threshold list for 41 days straight from 10/14/2022 – 11/04/2022.

This is a significant omission because being on the OTC Threshold list for a prolonged period indicates substantial fail-to-deliver positions in MMTLP. This could suggest that there was indeed a large amount of short-selling activity in MMTLP, which is a crucial point of contention between the MMTLP investors and FINRA.

Furthermore, according to Rule 203(b)(3) of Regulation SHO and FINRA Rule 4320, a participant of a registered clearing agency that has a fail to deliver position at a registered clearing agency in a Threshold Security for 13 consecutive settlement days must immediately close out that fail to deliver position by purchasing shares of like kind and quantity.

This rule was not enforced in the case of MMTLP, which raises serious questions about the fairness and integrity of the regulatory process.

The Wall Street Journal article emphasizes that investors should have spent more time valuing underlying assets. However, they overlooked the fact that the retail community understood that MMTLP was never intended to be publicly traded. There was always more supply than should have been available, allowing retail to buy additional shares of a preferred dividend capped at 165,472,241.

As short shares cannot go into a private company, they must be closed out before the spinout, which is not an oversight but a trading strategy. There are many types of trading strategies, including momentum trading, fundamental analysis, technical analysis, and quantitative analysis.

The WSJ article should acknowledge that retail traders follow strategic approaches rather than paint them as uninformed speculators.

The WSJ’s coverage overlooked several significant irregularities concerning MMTLP. A striking omission from your article is the rigorous process Meta Materials underwent to obtain approval for the S1 spinout.

After filing the S1 Spinout for MMTLP on 7/15/22, the company made four amendments before finally receiving approval on 11/18/22. Despite this thorough vetting process, investors encountered significant issues indicative of external factors impacting the situation.

According to the approved S1 filing, the record date and last day to sell MMTLP shares were December 12th, allowing the two days for trades to settle, which would align with the distribution date of December 14th. This filing explicitly detailed that trading of the Series A Preferred Stock would cease on the “distribution date.”

The S1 document made it clear: any trading of these shares on or prior to this date would invalidate the entitlement to receive shares of Common Stock in the Distribution corresponding to such shares of Series A Preferred Stock sold.

Contrary to these stipulations, however, trading was abruptly halted days ahead of schedule on December 8th, 2022. This unforeseen halt, described by FINRA as an “extraordinary event,” cut shareholders off from anticipated gains, plunging the market into chaos and confusion.

Further, the SEC-approved S1 also outlined a specific post-distribution process. It stated, “Commencing on or shortly after the Distribution Date, December 14th, the Transfer Agent (American Stock Transfer & Trust Co LLC) will mail to you an account statement indicating the number of whole shares of our Common Stock that have been registered in book-entry form in your name.”

The document further set expectations for the timeline, noting, “We expect it will take the Transfer Agent up to two weeks after the Distribution Date to complete the distribution of shares of our Common Stock and mail statements of holdings to all registered stockholders.”

An alarming discrepancy underscores the MMTLP issue that the Wall Street Journal’s article neglected. Even 175 days past the timeframe specified in the SEC-approved S1, the majority of the 65,000 shareholders have not received a statement from AST, the transfer agent, with their shares in book-entry form. This contrasts starkly with the S1’s guidelines, casting significant doubts about the execution of the process.

This delay is particularly troubling as it suggests a potential oversupply of shares in contrast to the allotment provided by AST. Such inconsistency could point toward the manipulative practice of naked short selling, which is detrimental to legitimate investors.

Adding to the uncertainty, Next Bridge Hydrocarbons, the company spun out of Meta Materials, confirmed that all 165,472,241 shares were handed over to AST. They also stated that AST had distributed all shares of our common stock relating to the Spin-Off – directly to any stockholders that held their shares directly registered with AST or to the shareholders’ bank, broker, or nominee representatives.

The incongruity between Next Bridge Hydrocarbons’ statement and the share distribution reality experienced by shareholders prompts more questions about the process. It further amplifies the concerns about the supply of shares and their correct allotment to rightful MMTLP shareholders, casting a shadow on the fairness and transparency of the whole process.

Through Freedom of Information Act (FOIA) requests, we have obtained correspondence between FINRA and the SEC, indicating that MMTLP hit FINRA’s Fraud Radar as early as November 29, 2021.

Despite this, trading in MMTLP was allowed to continue until the halt on December 8th. This raises serious questions about the actions of FINRA and the SEC. Why did they allow trading to continue despite knowing about potential issues? What were they hoping to achieve by allowing the trading to continue?

The article also disputes the idea that naked shorting is widespread in U.S. stocks. This manipulative tactic floods the market with nonexistent shares, aiming to drive down stock prices and harm legitimate investors.

Suppose the share count is accurate, and there is no issue with an oversupply or over-issuing of MMTLP based on its ability to be tradable and bought on broker-dealers. Why not just release the Electronic Blue Sheets (EBS)?

EBS data files, which contain both trading and account holder information, allow regulatory agencies to analyze a firm’s trading activity. The refusal to release this data raises further questions about the transparency and integrity of the regulatory process.

FINRA is currently facing litigation as a defendant in multiple lawsuits in California, Florida, Georgia, and Washington State, stemming from this situation. In addition, FINRA is the respondent in a pre-trial petition for discovery in New York State that is connected to the same matter. All of these court proceedings are requesting the Electronic Blue Sheet data, which to this point, FINRA has not made available.

The Wall Street Journal article suggests that the Orogrande Basin assets were worthless, but this is contradicted by the Reuters article, which reports that Torchlight Energy Resources Inc struck oil and gas at a development well in the Orogrande Basin in West Texas.

According to an analysis by Mike Mullen, president and founder of Stimulation Petrophysics Consulting, the article also mentions that the Orogrande basin has a recoverable reserves estimate of 3.7 billion barrels of oil equivalent. This information suggests that the Orogrande Basin assets have significant value, contrary to what the Wall Street Journal article implies.

The Wall Street Journal article largely echoes the perspective of hedge funds and market makers, individuals deeply involved in the trading dynamics under scrutiny. While their insight can be valuable, it is troubling that this article fails to incorporate viewpoints from the other side of the equation — the community of MMTLP shareholders. This is a diverse and vocal group, with many individuals keenly tracking developments and voicing concerns about the irregularities that have enveloped MMTLP.

The omission of these voices in the reporting is disconcerting. A balanced account should strive to encompass all perspectives, especially when the narrative involves such high stakes for those not typically represented in financial discourse. In this context, overlooking the shareholders’ experiences and concerns appears to be a significant gap in coverage, and we urge for a more inclusive approach in future reporting.

As Fair Markets Now, we believe the Wall Street Journal, with its long-standing reputation as a diligent watchdog against financial misconduct, is responsible for presenting a well-rounded view of the MMTLP issue. We demand a correction of the inaccuracies in the original article and a comprehensive follow-up piece addressing the critical concerns we’ve raised. Neglecting to do so will significantly deviate from the journalistic integrity that your esteemed publication is expected to uphold.

We urge the Wall Street Journal to take into account the perspective of the MMTLP shareholders, the irregularities surrounding the share distribution process, and the broader implications of unchecked short-selling practices. Fair and balanced coverage from your end can play a crucial role in exposing the injustices swept under the rug and restoring faith in our financial markets.

Your publication, wielding considerable influence, has the potential to impact the lives of countless Americans whom such fraudulent practices have victimized. By shedding light on the MMTLP case and the pervasive issue of unchecked short-selling, you can bring much-needed change to the financial reporting and regulation landscape.

We appreciate your consideration of these matters and eagerly anticipate your balanced and comprehensive coverage of the MMTLP issue and the broader problem of naked short-selling. Anything less would, unfortunately, represent a failing on the part of financial media to live up to the trust placed in it by the public.

Sincerely,

Fair Markets Now Team

Fair Markets Now is a community-driven organization started by members directly affected by the irregularities surrounding MMTLP. Our mission is to advocate for fair treatment and equal access for retail traders in the equity markets. All investors, regardless of their size or resources, should have a level playing field.

We aim to hold hedge funds, shorts, market makers, and brokers accountable for their actions and ensure they adhere to the same regulations as other market participants. By advocating for the enforcement of existing rules and penalties for rule breakers, we strive to create a transparent and equitable market for everyone.