Shareholders of Mullen Automotive (NASDAQ:MULN) stock should be on the lookout, as the electric vehicle (EV) company will vote on a series of substantial proposals at its special meeting of stockholders on Dec. 23. At the meeting, shareholders will vote on a potential reverse stock split, increasing authorized shares, and changing Mullen’s state of incorporation to Maryland from Delaware.
The first proposal seeks to propose an amendment for a reverse stock split that will “not be filed prior to the later of March 6, 2023 and 180 days after such date.” March 6 is the deadline for Mullen to have a minimum closing bid price of $1 for ten consecutive days in order to remain compliant with Nasdaq guidelines. If the company is unable to achieve this, it is still eligible to file a 180 calendar extension.
The stipulations highlighted above will only be active if Mullen does not file a reverse split amendment before May 1, 2023. During May, the Russell 2000 index holds its “rank day” to determine if a stock meets its necessary minimum inclusion price of $1. MULN stock was added to the index last June. If shareholders approve the first proposal, Mullen’s board will have authorization until December 1 of 2023 to implement a reverse split.
What This Vote Means for MULN Stock
The next proposal seeks to increase the authorized shares of common stock from 1.75 billion to 5 billion, marking an increase of 185%. As an EV startup, Mullen requires access to substantial sums of capital that will be allocated towards facility and production costs. However, existing shareholders will face severe dilution if this proposal is approved.
It’s highly likely that the reverse split proposal will be approved. That’s because CEO David Michery just recently purchased a single share of newly issued Series AA preferred stock for $25,000 in cash. That single share carries 1.3 billion votes that are only applicable for the reverse split proposal. On top of that, it seems that the only way for Mullen to satisfy the $1 minimum bid price is through a reverse split, unless shares somehow increase by 300%-400%. Besides Michery’s mega-share, there are 1.3 billion shares of common stock and each carries one vote. Meanwhile, Series B and C preferred stock each carry one vote as well, while Series A preferred stock carries 1,000 votes.
The Series AA preferred stock will vote in proportion with the rest of the classes of shares. If the reverse split proposal is approved, Michery will automatically redeem his share for $25,000 in cash.
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.
