Yesterday, Mullen Automotive (NASDAQ:MULN) held its special meeting of stockholders and disclosed the preliminary vote approval for Proposal No. 2, which involves increasing authorized common stock to 5 billion from 1.75 billion. The final results for the proposal will be disclosed by next week via a Form 8-K.
Meanwhile, Proposal No. 1 was approved at the company’s previous special meeting on Jan. 19. That proposal involves a reverse stock split in a range between 1-for-2 and 1-for-25.
At yesterday’s meeting, CEO David Michery stated, “The company has no plans at the current time to effect a reverse stock split.” This message was echoed in a press release published after the meeting.
However, this doesn’t confirm a reverse split won’t occur this year. Let’s get into the details.
MULN Reverse Stock Split Put on Hold
Proposal No. 1 carries several stipulations, which Mullen explained more clearly in its recent press release. Nasdaq policies state companies listed on the exchange must have a minimum price of $1. MULN has until March 6 to achieve a minimum closing price of $1 for ten consecutive business days in order to remain listed on the index. If Mullen is unable to do this, it can file for an 180-day extension, which would extend the deadline to Sept. 6. If the price still fails to reach $1 target by then, it will “effect a reverse stock split at that time to maintain its Nasdaq listing compliance.”
There’s another deadline Mullen is very well aware of. The company states that the Russell 2000 index will rebalance in June. Like the Nasdaq, the Russell 2000 requires a minimum price of $1. If the price fails to meet $1 in June, “Mullen will evaluate if it is in the best interest of shareholders to initiate a reverse stock split for continued inclusion in the Russell 2000 index.”
It should also be noted that the Russell 2000’s rank day occurs during May. As explained by FTSE Russell, “A stock must have a close price at or above $1.00 (on its primary exchange) on rank day to be considered eligible for inclusion.”
As a result, MULN shareholders should keep an eye out as we approach the month of May.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
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.