A question every MMTLP "Investor" should be asking right now.

Why the mad scramble to directly register private shares with the transfer agent?

Going to keep this one short (no pun intended, and I have no position in MMTLP and never have).

In May of last year I wrote a summary of the insanity surrounding “MMTLP”, the ticker that was assigned to a preferred share of Meta Materials that entitled holders to a share of Next Bridge Hydrocarbons, a private oil and gas exploration company, pursuant to a corporate action for holders of record on the December 12, 2022 settlement date. I, like many others before and after, have tried to explain what happened, but denial and confirmation bias are psychologically powerful, especially when being fed what you want to hear from various clowns. You can read the article here:

Like any train wreck, it’s really, really hard to look away, but thousands of bagholders continue to make noise on a ticker that hasn’t existed since 2022. Harassing regulators, including death threats to FINRA employees (so bad that FINRA actually had to send its entire staff home for a week), and whipping up Members of Congress to “demand answers” from FINRA and the SEC, despite FINRA providing such answers multiple times (e.g. here: https://www.finra.org/investors/insights/supplemental-faq-mmtlp-corporate-action-and-trading-halt)

Disappointment is just the action of your brain readjusting itself to reality after discovering things are not the way you thought they were. - Brad Warner

One of the things that has befuddled me more recently is a move by Next Bridge Hydrocarbons and a vocal group of cheerleaders to encourage shareholders to move their shares out of street name (i.e. held on their behalf by their broker’s nominee company for ease of trading, should it ever trade again), and directly register with the company’s transfer agent (AST / Equiniti).

The relevant text of the PR is below:

I am uncertain about the moral (or even legal) basis for treating shareholders differently, and some may be unable or unwilling to directly register shares, with potential tax or other consequences (e.g. shares held in an IRA). This his struck me as a bit of an odd thing to do. In any case, after many months and iterations, it seems the SEC sufficiently barfed on this idea such that the company was “requested” to withdraw its S-1:

The company was sure to continue its carrot and stick approach to getting shareholders to directly register their shares. DRS your shares, or miss out on the possibility of a future distribution of a speculative new subsidiary. DRS your shares, or miss out on the possibility of future “blockchain trading”. DRS your shares, which will “help in matters of corporate governance and communications with our shareholders”. This latter point was extra curious, as the company, due to its shareholder count, is a publicly-reporting issuer, filing 10-Ks, 10-Qs, and 8-Ks with the SEC, and every other public company seems to be able to do “corporate governance” just fine.

A simple search on Xitter (pronounced “shitter”), errr I mean X, for “$MMTLP” and “AST” will generate an amusing cacophony of people encouraging each other to directly register shares. Here is a small sample from just the past hour (special shout out to “@chrisangelo667” for giving a great example of how far down the rabbit hole these folks are).

While the company didn’t say this explicitly, it seems the primary reason given by most in advocating for direct registration is that, once a sufficient number of people do so, it will expose the zillion “naked shorts” and “counterfeit shares” that surely must exist. After all, how else would one explain how an asset that Meta Material’s own third party valuator pegged as being worth $0.44 per share was being “held down” at its $12 peak, or the final $2.90 trading price.

So there’s really no downside to directly registering shares, right? Potentially get some future goodies in another oil and gas play, perhaps qualifying for “blockchain trading”, making it somehow easier for the company to “communicate”, and if you get to expose all the naked shorties with their counterfeit shares, it’s all upside. Or is it?

Next Bridge shares are already registered. The company already must make SEC filings as a public issuer. As FINRA points out, the company could easily make the shares tradable by applying for a CUSIP:

Source: https://www.finra.org/investors/insights/supplemental-faq-mmtlp-corporate-action-and-trading-halt

Too bad. With hundreds of millions of offshore counterfeit naked shorties desperate to cover, imagine the lucre that could be had if it would only trade. Perhaps the $206 fee that CUSIP Global Services charges is too prohibitive, or the $309 it would cost for a one-hour turnaround:

Source: CUSIP Global Services

As FINRA noted, DTC eligibility (fairly easily obtained), would also help facilitate trading, as described here:

Source: DTCC

With trading in the shares seemingly possible on as little as one hour’s notice, investors would do well to at least think about some of the disadvantages should they chose to directly register their shares.

Should trading ensue, investors with directly-registered shares will have a difficult time using the broker/dealer network to execute trades without transferring them back to their broker. Apart from the fees and potential time lag in doing so, it’s worth noting that many brokers have policies that may, depending on the circumstances, not allow for a transfer in of OTC / pink sheet / penny stocks. To test this, I reached out to two major retail brokerages (Schwab and Fidelity) and asked them for their policies on OTC and penny stocks. See their written replies below:

Source: Fidelity chat

It may very well be that Next Bridge would meet the criteria AFTER it began trading, but it’s also a possibility that it might not (e.g. depending on which OTC Market Tier it would be in, or if the trading price was low enough), or if OTC Markets designates Caveat Emptor on the security.

Schwab is below:

Source: Schwab chat

I’m not sure the Schwab response is entirely fulsome (unlike Fidelity which have a specific policy). A recent Reddit thread of baggies discussing moving FROM Schwab (not TO) is here: https://www.reddit.com/r/MMTLP_/comments/192vj91/anyone_transfer_from_schwab_yet_80_worth_it/

My point is not to definitely say what a broker will or won’t do in certain situations. I have some queries into other brokers. The future is hard to predict. My point is that investors considering directly registering shares in ANY small company would be wise to “do their DD” (who are we kidding though) in advance, and check with their broker (or find a new one) that they won’t have potential issues in the future if trading in Next Bridge ever resumes.

There also appears to be little tangible benefit in doing so NOW, as it could always be done at a later time in advance of any blockchain or other goodies. Of course, that means you won’t be doing your bit to expose the evil cabal of naked offshore share counterfeiters.

I’m left to wonder if one of the unspoken goals of some people encouraging others to get their shares out of the broker/dealer network is to hamper, delay, or frustrate their future ability to sell (and pressure what could be a stock with poor liquidity), but that is pure speculation on my part.

Good luck to all.