It appears that shares of Mullen Automotive (NASDAQ:MULN) will soon be removed from the Russell 2000 Index. According to FTSE Russell, the provider of the index, stocks must have a closing price of at least $1 on the rank day in order to be eligible for inclusion. If an existing member’s price is less than $1 on rank day, it may still be considered eligible if the average daily closing price over the past 30 days is $1 or greater.
This year, the rank day fell on April 28, which was before Mullen initiated a 1-for-25 reverse stock split on May 4. Before adjusting for the reverse split, MULN closed at about 7.6 cents on April 28. Its average closing price during the 30 days prior to April 28 did not exceed $1.
MULN Stock at Risk of Russell 2000 Removal
Mullen’s removal from the Russell 2000 would mean that the index, and any variances of the index, would have to sell out of their position in MULN stock. Data from Fintel.io, which tracks these positions, has not been adjusted for Mullen’s 1-for-25 reverse stock split. If you were to adjust this data for the split, the iShares Russell 2000 ETF (NYSEARCA:IWM) owns 881,647 shares, the iShares Russell 2000 Growth ETF (NYSEARCA:IWO) owns 308,531 shares, and the iShares Micro-Cap ETF (NYSEARCA:IWC) owns 88,229 shares.
On June 5, FTSE will initiate a “lock-down” period in which all updates to the index reconstitution are considered to be final. After that, all reconstitutions will be final on June 23, while the the Russell 2000 index will begin trading with its new constituents as of the market open on June 26.
Meanwhile, Mullen’s inclusion on the Nasdaq exchange seems to be at risk as well. Despite trading above $1 for 10 consecutive business days, MULN is still listed on Nasdaq’s Noncompliant Companies list. In a press release, the electric vehicle company noted that it was awaiting “confirmation from Nasdaq that it meets Nasdaq’s requirements for continued listing as a result thereof.”
However, Nasdaq states that it may, in its discretion, require companies to trade above $1 for more than 10 consecutive business days, but generally less than or equal to 20 consecutive business days, in order to regain compliance. Factors that the exchange considers include, but are not limited to, the margin of compliance, trading volume, the market maker montage, and price trend. If MULN still remains noncompliant, it has until Sept. 5 to regain compliance or risk being delisted from the exchange.
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.