Shares of a relatively small Canadian materials company rose after some misguided investors apparently thought they were getting a deal to buy shares in the world’s largest social media company.
Shares of Nova Scotia-based Meta Materials gained 26% outside of trading hours on Nasdaq on Thursday, after Facebook Inc. said it would change its name to Meta.
More than 12 million shares of the Canadian company bearing the ticker symbol MMAT changed hands during the trading session. This is more than double the usual daily volume.
Facebook’s shares trade under the symbol FB, but in December, in line with the metaverse-focused company name change, they will change their ticker symbol to MVRS.
The Canadian company is only the latest to be given a specific type of mistaken identity – one that sees investors pouring money into one stock because they think it’s another.
In a research paper published by Rutgers University in 2019, Professor Vadim Balashov and co-author Andrei Nikiforov listed 254 cases of companies that experienced fluctuations in their share prices linked to events in another company with either a similar name or a similar stock symbol. .
Erroneous Inventory Identity Case
“It happens more often than you think,” Balashov said in an interview with CBC News. “Something’s going on with a big business, and then there’s going to be a reaction in the small business. [but] nothing is really happening with small business. It is investors who buy and sell bad stocks. “
There is a long list of companies that have had something similar. In 2013, when Twitter announced its intention to go public, shares of a dormant electronics retailer called Tweeter Home Entertainment Group, Inc. soared 1,400%.
The phenomenon occurs in both directions. Balashov says that in 2007, Graco Children’s Products Inc. announced the recall of certain baby toys. The shares of an independent manufacturer of fluid management systems named Graco Inc. fell six percent at some point that day. “People were selling the wrong stock, so that happens too.”
More recently, Zoom Technologies, which makes electronic communications products for mobile phones, jumped at the height of the pandemic when the world flocked to the video conferencing service of the same name.
And in December 2020, the DoorDash food delivery service went public during an IPO. On the same day, shares of a Florida door manufacturing company with the ticker symbol DOOR rose.
Even pros and algorithms mix
Balashov’s research indicates that it’s not just uninformed retail investors who get their arms crossed – smart money from big institutions also makes these mistakes all the time.
“Portfolio managers [at] mutual funds, hedge funds – they’re still people, ”he said.
Even high-frequency trading algorithms are involved, as some are programmed to buy stocks that move in a certain way regardless of the underlying activity. So when algorithms “read” information and make transactions based on the stories they filter, “they also make mistakes, they also confuse businesses,” Balashov explains. “We saw it,” he said.
It’s not even the first time that a Canadian company named Meta has been drawn to Facebook CEO Mark Zuckerberg’s interest in the Metaverse. In 2017, his charitable foundation bought a Canadian tech company called Meta for an undisclosed sum.
According to partners at iGan, the Toronto-based venture capital fund that was an early investor in Meta before selling the company to Zuckerberg, the company is using artificial intelligence to help researchers stay up to date with the latest academic research in their field.
Meta Materials – which designs materials used in a variety of industries, including consumer electronics and aerospace – seems more than happy to play along.
Company CEO George Palikaras appeared to be having fun on Thursday, tweeting: “On behalf of @Metamaterialtec, I cordially welcome @Facebook to the #metaverse.”
On behalf of @Metamaterialtec I welcome to @Facebook to #metaverse. #GoBeyond $ MMAT # AR #VR Meta, meet META® 🙂 https://t.co/8gOgkYTvSl pic.twitter.com/2i2PMKwzFA< /a>
When asked to comment, Palikaras pointed out a company announcement Thursday about an upcoming online conference featuring executives from Meta Materials, Facebook’s virtual reality (VR) division and other companies.
Time will tell whether the new owners of a suddenly popular materials company will come to regret their investment or not, but Balashov’s advice for avoiding the problem in the first place is simple.
“Just check what you are buying,” he said. “Double, triple check. It’s that easy.”
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