All eyes are on Mullen Automotive (NASDAQ:MULN), as the electric vehicle (EV) company has responded to the complaint filed by Drawbridge Investments and DBI Lease Buyback Servicing. Earlier this month, the plaintiffs alleged that Mullen had not fulfilled its obligation to deliver Drawbridge any Series E preferred stock. MULN stock hasn’t been doing very well today and is down about 4% in afternoon trading and 50% year-to-date.
The plaintiffs seek a temporary restraining order (TRO) concerning increasing authorized shares of any class of stock or to have Mullen agree not to issue or increase authorized preferred stock until the plaintiffs receive Series E preferred stock. If these reliefs can not be provided, then the plaintiffs seek to receive at least $100 million in damages.
Let’s take a look at Mullen’s response.
MULN Stock: Mullen Responds to Drawbridge Complaint
First, Mullen, represented by Manatt, Phelps & Phillips, LLP, brings up the “alleged predatory lending practices” used by Drawbridge and its Principal, Steve Davis. Mullen provides several examples of litigation involving Davis in the past. In one example, Davis allegedly told a client that there were only two ways to escape payment: “(1) win the lottery, or (2) die because [Davis] could not collect money from a dead body.”
Mullen also accuses the plaintiffs of taking advantage of a “cash-strapped startup company” to receive a payout of over $25 million, with the opportunity to buy up to $25 million in preferred shares that would come with generous warrants. The company adds that the TRO has no legal grounds and should be subject to Delaware laws instead of New York laws. In addition, Mullen adds that the plaintiffs are not registered to do business in New York.
Next, Mullen adds that changes to its capital structure, which the plaintiffs characterize as enacted in “bad faith,” were approved by the Delaware Court of Chancery.
In conclusion, Mullen believes the plaintiff’s complaint is invalid because there is no enforceable option agreement or breach of the agreement. Mullen alleges that the agreement signed on June 17, 2022, is not an option agreement and that the agreement “acknowledges that it is not.” Furthermore, Mullen notes that the plaintiffs drafted the note sale agreement in their favor and that it has already satisfied the agreement by including its signature and providing the stated sum of money.
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.