Last week, Mullen Automotive (NASDAQ:MULN) released a Form 8-K detailing legal matters that were initiated in December. These legal matters will affect the upcoming special meeting of stockholders on Jan. 19.
On Dec. 7, a shareholder filed a putative class action lawsuit against the company, titled Robbins v. Michery, in Delaware’s Court of Chancery. On Dec. 13, another putative stockholder class action, titled Foley v. Michery, was filed against the company. Both lawsuits allege that the number of common stock issued and outstanding as of the annual meeting record date was 477.51 million. Based on this share count, and when considered separately as a class, the proposal to increase authorized shares at the 2022 annual meeting should not have been passed. The 2022 annual meeting occurred on July 26.
MULN Stock: Mullen Receives 2 Lawsuits
Mullen responded, explaining that it does not believe that the move to increase authorized shares was “either invalid or ineffective.” The electric vehicle (EV) company added:
“However, to resolve any uncertainty, the Company is pursuing actions to ratify the 2022 Certificate Amendment through the filing of a validation proceeding with the Delaware Court of Chancery (the ‘Court of Chancery’) pursuant to Section 205 of the Delaware General Corporation Law (‘Section 205’). Section 205 permits the Court of Chancery, in its discretion, to ratify and validate potentially defective acts.”
What that means is that the Court of Chancery is ultimately in charge of siding with Mullen or the class action filers. The court has scheduled a hearing for Jan. 23. In the case of Robbins v. Michery, the plaintiff also argues that Mullen sought to change its state of incorporation to Maryland to protect its board of directors from lawsuits. Mullen previously announced that it would no longer pursue a state of incorporation change to Maryland. The board noted that it may pursue this change again in the future when the time is right.
As a result of the lawsuits, Mullen will no longer file the amendment to its Certificate of Incorporation. That means that it will no longer file Proposal no. 1 at its Jan. 19 meeting, which seeks to enact a reverse stock split in a range between 1-for-2 and 1-for-25. It appears that Mullen will also not file for Proposal no. 2, which seeks to increase authorized common stock to 5 billion from 1.75 billion. These two proposals may be pursued in the future, which depends on the decision of the Court of Chancery.
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.