Mullen Automotive (NASDAQ:MULN) stock is plummeting more than 20% today. This comes after the electric vehicle (EV) company announced it would enact a 1-f0r-25 reverse stock split. The split will become effective tomorrow, May 4.
The split shouldn’t come as a surprise to shareholders. This is because the price of MULN has been below $1 since July 2022. Shareholders also voted in favor of a reverse split in a ratio between 1-for-2 and 1-for-25 at the company’s last special meeting of stockholders.
MULN stock is listed on the Nasdaq, which requires it to have a minimum price of $1. The deadline for Mullen to achieve this threshold was extended to Sept. 5 after shares failed to reach $1 for 10 consecutive business days on March 6, the date of the first deadline.
In the reverse split announcement, Mullen warned that there’s “no guarantee the Company will meet the minimum bid price requirement” following the share consolidation.
MULN Stock: Mullen Announces 1-for-25 Reverse Stock Split
Mullen is also a member of the Russell 2000, which also has a minimum $1 price requirement. The index held its 2023 rank day on April 28.
Rank day is when member stocks are screened for a minimum $1 price. If a stock’s price is less than $1 on rank day, the stock can still be eligible for inclusion if its average closing price over the past 30 days was at least $1 per share. Mullen appears to have failed to satisfy both of these requirements.
On May 19, preliminary results of the portfolio reconstitution will be revealed. Updates will also be provided on May 26, June 2, June 9, June 16 and June 23. The rebalanced Russell 2000, with all of its new constituents, will take effect at the end of the day on June 23.
In the reverse split announcement, Mullen noted that it would not provide fractional shares sustained as a result of the reverse split. Instead, all fractional shares will be rounded up to the nearest whole share. No action is required for shareholders relating to the reverse split.
Shares of MULN stock are currently trading for approximately 6 cents. A 1-for-25 reverse split will bring shares to about $1.50, satisfying the minimum price requirement.
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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.