Shares of Mullen Automotive (NASDAQ:MULN) are continuing their decline lower today and are down by about 5%, which brings the electric vehicle (EV) company’s year-to-date decline to more than 70%. Mullen has dealt with a variety of problems this year, including a share price below $1, poor earnings, and a departure of both its CAO and auditor. Shares of MULN stock are hovering near 9 cents at the time of writing.
Meanwhile, a securities purchase agreement (SPA) and the resale of up to 2.1 billion shares spells further dilution for shareholders. When shares outstanding increases, the value of existing shares decrease. The recently announced resale, if completed in whole, would mean that there would be 5.9 billion shares of MULN outstanding.
However, Mullen only has authorization to issue up to five billion shares. This has led shareholders to speculate that Mullen will initiate a reverse stock split to complete its resale in full. A reverse split would consolidate the number of shares outstanding.
Why Is MULN Stock Down 5% Today?
Mullen will not collect proceeds from the resale, except for “any proceeds from any cash exercise of the Warrants.” The selling shareholders of the resale include Esousa Holdings, Acuitas Capital, Ault Lending and Davis-Rice Pty Limited. The resale, which consists of Series D preferred stock and warrants that are convertible and exercisable to common stock, is tied with an SPA that resulted in Mullen receiving $45 million on April 17. The company is slated to receive another $45 million on May 15.
In addition, a reverse split seems highly likely for the company. Since MULN is listed on the Nasdaq, it must have a minimum price of $1. Mullen has already received a deficiency notice from the exchange and was given a deadline of March 6. However, shares of MULN failed to reach $1 for a minimum of 1o consecutive business days, which resulted in the company receiving another 180 days, or until Sept. 6, to reach a price of $1. Mullen stated that it would initiate a reverse split if its shares are still below $1 by then.
On another note, MULN has failed to squeeze higher, despite having a short interest as a percentage of float of over 10% since February 2022. As of March 31, there were a total of 279.15 million shares shorted, equivalent to a short interest of 18.5%.
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.
