This morning, Mullen Automotive (NASDAQ:MULN) released a letter to shareholders that contained a confusing error. The error has since been corrected to reflect the correct figure.
Before, the letter stated: “The Company currently trades at a discount to its current cash position of $135 million or $.038 per share.” Mullen erroneously added an extra zero to its cash position of $0.038, as it actually should be $0.38, which Mullen corrected. This glaring error was noticed in a previous article published earlier today:
“This statement seems flawed, as MULN trades above 3.8 cents, which would mean that it is not trading at a discount. Perhaps they included an extra zero in the $0.038 figure.”
Shareholders can estimate Mullen’s outstanding common stock using a cash per share of 38 cents by dividing 135 million by 0.38, which gets us to 355.26 million. As of June 12, there were 263.27 million shares of common stock outstanding.
MULN Stock: Mullen Issues Letter to Shareholders Correction
If the estimate of 355.26 million shares outstanding is correct, that means that Mullen issued over 90 million shares between June 12 and this morning before the market opened. Between June 12 and 14, shares of MULN stock declined by about 46%.
Another factor sending MULN stock lower is its upcoming annual meeting of stockholders, which contains several dilutive proposals up for a vote. The meeting will take place on Aug. 3, with a total of 11 proposals. One of these provisions is a state of incorporation change to Maryland from Delaware. Another is a reverse stock split in a range between 1-for-2 and 1-for-10.
So, why exactly should shareholders care about a move to Maryland? Mullen provided the reasons in its proxy statement, which include increasing or decreasing the aggregate number of authorized stock, or any other class of shares, without shareholder approval. Another reason is that Mullen would be able to initiate a reverse stock split in a ratio of less than 1-for-10 in any 12-month period without shareholder approval as well.
Other proposals include a 52 million share increase to authorized shares for issuance under the 2022 Equity Incentive Stock Plan and the issuance of shares under CEO David Michery’s Performance Stock Award Agreement. None of the proposals seem accretive to shareholders unless you view rewarding management as simultaneously increasing management’s motivation to perform well for shareholders.
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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.
