Shares of Mullen Automotive (NASDAQ:MULN) stock are in full focus after the electric vehicle (EV) company filed to resell up to 2.11 billion shares of common stock. These shares will become issuable to the selling stockholders upon the conversion of Series D preferred stock and the exercise of warrants.
The Series D preferred stock will be convertible to common stock on a 1-to-1 basis. Meanwhile, the warrants will have an exercise price of the lower of $1.27, which was the closing price of MULN stock on the day that the securities purchase agreement (SPA) was enacted or the closing price of MULN the day before the “Purchase Date” with a price floor of ten cents. These warrants will be exercisable upon issuance and carry a term of five years.
The selling stockholders may sell the shares at their discretion. Mullen will not collect any proceeds from the sale of common stock by the selling stockholders “other than any proceeds from any cash exercise of the Warrants.”
Mullen Files to Resell Up to 2.1 Billion Shares of MULN Stock
Several notable selling stockholders are mentioned in the filing, including Michael Wachs of Esousa Holdings, Terren Peizer of Acuitas Capital, and Timothy Davis-Rice of Davis-Rice Pty Limited. Wachs is eligible to resell up to 784.47 million shares, Acuitas can resell up to 769.09 million shares, and Davis-Rice can sell up to 384.54 million shares. Following the completion of the resale, Wachs will own 300.28 million shares, Acuitas will own 7.64 million, and Davis-Rice will own 34.25 million.
Mullen also disclosed that it had 3.79 billion shares of common stock outstanding as of April 13. However, the resale of 2.11 billion shares would make common stock outstanding greater than 5 billion, which is the number of shares that Mullen is authorized to issue. This has led to speculation that Mullen will enact a reverse stock split before the resale is completed in order to consolidate the number of shares.
So, where exactly are these warrants and Series D preferred stock coming from? They stem from an existing SPA that will see Mullen receive $90 million in two equal tranches: one today, April 17, and the other on May 15. In exchange, Mullen will provide Esousa Holdings, Acuitas Capital, Davis-Rice Pty Limited, and Ault Lending with Series D preferred stock and warrants.
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.
