Shares of Mullen Automotive (NASDAQ:MULN) stock hit a new 52-week low of 20 cents this morning following yesterday’s news of a resale of up to 220.82 million shares. The resale will solely consist of notes that are convertible into common stock. Mullen will not receive proceeds from the sale of these shares.
In November, the company amended its securities purchase agreement (SPA) for a third time. That amendment stated that investors, such as Esousa Holdings, would pay $150 million to receive convertible notes instead of Series D preferred stock and warrants. These notes could be converted into MULN stock “on November 21, 2022, and (ii) at any time or times at the discretion of the holder,” which hints that the investors may have already converted their notes. For every share of common stock received from the conversion, the investors will also receive warrants exercisable for 185% of the common stock received.
However, there is still $90 million remaining from the commitment amount in the SPA, which was enacted in a previous second amendment. Let’s get into the details.
A $90 Million Catalyst Is Brewing for MULN Stock in 2023
The $90 million will be paid out in the form of Series D preferred shares in two tranches next year, on Jan. 24 and Feb. 24. Mullen did not specify the value amounts for each date. The purchase price of the shares will be the lower of:
- $1.27, which was the closing price on the day the SPA was executed.
- The closing price on the trading day before the purchase date, with a price floor of 10 cents.
Investors receiving the shares will also receive warrants exercisable for 185% of the Series D shares purchased. These warrants will have an exercise equal to the price that the Series D shares were purchased for. Mullen has stated that it will file a resale form for the shares issuable upon conversion of all of the notes and warrants no later than Dec. 23.
The third amendment also states that between April 1 and June 30 of next year, the investors stipulated in the third amendment will have the right to purchase additional Series D shares “in an amount equal to such investor’s pro rata portion of $100,000,000” under the same terms of the SPA. If purchased, the investors will receive warrants equal to 110% of the Series D shares purchased.
All in all, it seems that more dilution is on the way for MULN. The company will soon host its special meeting of stockholders on Dec. 23, where shareholders will vote for a reverse stock split and increasing authorized shares from 1.75 billion to 5 billion.
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.
