Mullen Automotive (NASDAQ:MULN), a troubled electric vehicle company, will try to execute a reverse stock split on Jan. 19.
An attempt to win shareholder approval on Dec. 23 failed for lack of a quorum. Most shares that were voted supported the proposal, but the vast majority abstained.
Mullen has until March 6 to get its stock price above $1/share or face delisting. But it could get a 180-day extension. On Dec. 29 the shares were trading at about 23 cents.
The Price of Failure
Mullen says the reverse split could be anywhere from 1:2 to 1:25. The last would get the stock’s price to about $5.75/share. MULN’s market capitalization is about $400 million.
In addition to March 6, Mullen faces a May deadline to remain part of the Russell 2000. Mullen was added to the index last June, which helped the stock trade as high as $1.46.
The problem, as I wrote in May, is that Mullen lacks the cash to deliver on its promise of a mass-produced electric car.
Since June it has made two major acquisitions of bankrupted companies. Bollinger Motors, which had brought a promised plant to Mississippi. And Electric Last Mile Solutions, which had brought a promised plant to Indiana. Both plants need cash to get into production. Mullen had just $61 million of cash in June. It bought ELMS after raising $150 million from existing shareholders.
CEO David Michery, a former music executive, has been showing off a high-end electric vehicle called the Five and continues to promise production real soon now. But he has also been selling his own stock. This does not inspire confidence.
There remains hope, which is why Mullen was up 10% in early trade on Dec. 29. Blackrock (NYSE:BLK) continued to buy Mullen stock in the third quarter. The company has made deliveries of a vehicle called the I-Go in Europe. The company recently hired two executives with experience at General Motors (NYSE:GM) and Ford Motor (NYSE:F), respectively. This led fellow InvestorPlace contributor David Moadel to recommend you buy it when it gets over $1/share.
MULN Stock: What Happens Next?
Mullen needs cash in a market that’s collapsing. All auto stocks are down, especially those selling electrics. Big auto companies from GM and Ford to Germany’s Volkswagen (OTCMKTS:VWAPY) and China’s BYD (OTCMKTS:BYDDF) are all preparing to take on Tesla (NASDAQ:TSLA). And Mullen cannot afford to fall behind.
Absent a reverse split, I doubt you’ll see Mullen stock get anywhere near Moadel’s buy target.
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On the date of publication, Dana Blankenhorn 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.
