Mullen Automotive (NASDAQ:MULN) stock is down about 14% today after the electric vehicle (EV) company hosted its annual shareholders meeting. At the meeting, shareholders preliminarily approved all six of Mullen’s proposals. The company said it will file an 8-K form on or before Aug. 1 with the final results.
Today, MULN stock is likely falling because voters authorized the company to increase the common shares outstanding to 1.75 billion. As of June 2, Mullen had 477.51 million common shares outstanding. This means common shares outstanding would increase by more than 260%, diluting existing investors. Voters also authorized Mullen to increase preferred stock shares to 500 million, meaning the total number of authorized shares would increase to 2.25 billion.
Mullen highlighted several reasons as to why it wants to increase the number of authorized shares. These include potential acquisitions, establishing partnerships and further spending on research and development. In addition, the company will put some shares toward “equity incentives” for employees. For example, CEO David Michery has an extremely generous compensation plan.
With that in mind, let’s dive into the other proposals from the meeting.
Preliminary Meeting Results Sink MULN Stock
Mullen’s first proposal from the meeting seeks to elect three directors, including CEO David Michery. These directors will serve a three-year term that will end during the annual meeting in 2025.
The next proposal — which comes after the proposal to increase shares, as already discussed — looks to approve Mullen’s 2022 equity incentive plan. This plan reserves 175 million common shares for employee awards and contains a no stock options repricing provision, among others.
Similar to that proposal, the fourth item of the vote asks shareholders to approve Michery’s performance stock award agreement. Meanwhile, the fifth proposal seeks approval of the potential issuance of Series D preferred stock, warrants and common shares upon the conversion of Series D preferred stock and warrants.
Finally, the last proposal detailed the hiring of Daszkal Bolton as Mullen’s independent public accounting firm.
Of all these items, the proposal to increase the share count seems to be the most concerning to investors. However, as a young EV company, Mullen does need additional capital to ramp production.
Still, the company’s incentive plans do seem a bit excessive. MULN stock fans will want to watch for when the company officially files a Form 8-K with the final votes.
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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.