Mullen MULN Reverse Split: All You Need to Know
MULN Reverse Split: It is the third reverse split proposal in the last six years and in all likelihood, it will go through in the shareholders’ meeting, more so after special powers are given to CEO by Series AA share.
In the last decade, there are various startups in the EV sector booming to follow the footsteps of Tesla Inc and want to match the success rate of the EV big giant. To name a few, Rivian Automotive, and Lucid Motors have done their part to make space for them in the EV marketplace.
Mullen Automotive is also trying to make its space in the EV sector. It is a publicly-traded company, but it can be classified as a penny stock since its share price is less than $1 for the last six months, seldom jumping over $1. The share price has crashed 97.66% in the last year proving to be a disaster for the investors and shareholders.
These developments have prompted the company to go propose a reverse split. In this article, we will talk about the probable reverse split and its impact on the share price in the upcoming months on the share price.
MULN Reverse Split: Key Takeaways
- The company has notified special shareholders to meet on December 23rd to discuss a probable reverse stock split.
- The company has issued a single share of Series AA preferred shares to CEO carrying 1.3 billion votes for the upcoming shareholders’ meet.
- The company has done two reverse splits in the past, one in 2016 and another in 2017.
- MULN stock is down by about 97% in the last year and has proven to be a disaster for investors and shareholders.
MULN Reverse Split: Facts About the Reverse Split
- Stockholders to vote on the proposal of reverse split- Mullen Automotive has announced that special shareholders meeting is called upon on December 23rd, 2022 for conducting votes on several proposals, the first and foremost being the proposal of the reverse split. The proposals are meant to affect a reverse split of the outstanding shares of the company in a ratio not less than 1-for-2 and not greater than 1-for-25.
Actually, on September 9, 2022, Mullen Automotive received a notice from Nasdaq Stock Market indicating that the company’s common stock has closed below $1 for 30 consecutive days and as per Nasdaq listing rule 5550(a)(2), the minimum bid price requirement for continue listing on Nasdaq Capital market is $1. Hence, the company has March 6, 2023, to get the reverse split done to take the share price above $1 from their current price ($0.19 as of 25.11.2022) to maintain the listing on the Nasdaq exchange. The company can get additional 180 days after March 6th, 2023, however company needs to notify Nasdaq about its plan to achieve the minimum bid price.
Also, MULN stock is included in Russel 2000 index and so it must have a closing price above $1 on the rank day i.e., in May 2022. Therefore, MULN in all likelihood will get a reverse split effective from March 2023. The ratio is still not decided but it must be greater than 1 for 5 to take the current price above $1.
- Other Proposals to be discussed in shareholders’ meeting- Along with the reverse split proposal, there are four other important proposals set to be discussed in the meeting. Proposal number 2 seeks to increase the aggregate number of shares of common stock from One Billion Seven Hundred Fifty Million (1,750,000,000) to Five Billion (5,000,000,000. But if this proposal is rejected at the special meeting, the Board of Directors can still effectuate the reverse split at their discretion but before December 2023. This effectively means that there is more dilution of the existing shareholders.
Another proposal seeks to change the state of incorporation of the company from Delaware to Maryland without specifying any particular reason. Next, proposal number 4 is to issue $150 million in notes and $190 million worth of Series D preferred stock. Each will be convertible into shares of Common stock and warrants will also be exercisable into shares of Common stock. All this means that there is more and more dilution of shareholders’ ownership on the way for Mullen Automotive.
- CEO David Michery is in favor of reverse split- On November 14th, Mullen entered into a “Subscription and Investment Representation Agreement” with CEO David Michery. Mullen has issued one newly issued Series AA preferred stock for $25,000 in cash. But when a MULN share is trading at 19 cents, what is the purpose of $25,000 for a single share?
Also Read: MULN Stock Forecast
The issued Series AA share carried 1.3 billion votes in the shareholders’ meeting. As of record date, there are 1.3 billion shares of common stock outstanding with each share carrying one vote and Series B and C carrying one vote as well. However, Series A carries 1000- votes per share. It means that CEO David Michery will have much more voting power than earlier to effectuate the reverse split.
On top of it, Michery is allowed to redeem his share of Series AA for $25,000 in cash upon the approval of the company’s stockholders of the reverse split. It means that this series of shares was specially designed to give CEO more voting powers for shareholders’ special meetings to work out the proposal for the reverse split.
Additionally, in another 8K forms, Mullen informed that it has lowered the quorum for a stockholders’ meeting to only 33.33% of all the shares issued and outstanding. This is another way of giving the CEO more power to implement the proposals discussed in the stockholders’ meet.
- Reverse stock split in the past- As the current reverse split proposal is underway, it is important to note that there were two more occasions on which Mullen did a reverse stock split in the past. The first occasion was in May 2016, a reverse split of 1-for-10, and the second one was in May 2017 with the same ratio of 1 for 10. On both occasions, the share price was below $1 and hence, it was a clear requirement of the listing rules to go for the reverse split. This time also, it is expected that the reverse split ratio will be 1 for 10 to take the share price comfortably above $1.
Conclusion: Does Reverse Split make MULN a buy?
Reverse split in general is not liked by the market. It depicts that company is in deep trouble because its share price has fallen below $1. The same is the case with Mullen Automotive. It is the third reverse split proposal in the last six years and in all likelihood, it will go through in the shareholders’ meeting, more so after special powers are given to CEO by Series AA share.
But the reverse split in technical terms does not impact a company’s market cap in any sense. Only the count of outstanding shares changes by enacting a split. The positive outcome from a reverse split for Mullen is that it may open some institutional investors to invest as they set a price limit for shares below which they refrain from investing.
But MULN is not meant for retail investors and only short-term traders can make some quick bucks out of this budding automobile company.
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