Mullen Automotive (NASDAQ:MULN) has issued another press release that should make investors nervous. Although Mullen did provide reassurance that its production is on track for the current quarter, its recent letter to shareholders includes some questionable numbers.
Mullen said that its shares are currently trading at a discount to its cash position, which it initially listed as $135 million or 3.8 cents per share. However, its shares closed out June 13 at 32 cents and are trading now for 25 cents.
The company has since pulled the initial release and updated its statement. The new release states that its cash position is 38 cents per share.
However, this correction doesn’t answer all of the math questions. Let’s take an in-depth look at Mullen’s letter to shareholders.
MULN Stock: Inside the Letter to Shareholders
There’s quite a bit to unpack regarding the original shareholder letter. The indicated cash position of $135 million or 3.8 cents per share didn’t make sense, as the current MULN stock price is 25 cents. The company explicitly referenced the June 13 closing price of 32 cents. This suggests that the writer simply included an extra 0, and that they meant to indicate a cash position of 38 cents per share. Mullen confirmed this in its updated letter to shareholders, stating:
“We want to respond to the many emails and calls regarding the decrease in our share price. Since March 31, 2023, our stock has declined 90% from $3.25 per share. On June 13, 2023, the Company’s common stock closed at $0.32 per share. The Company currently trades at a discount to its current cash position of $135 million or $0.38 per share.”
It is still unclear how many shares outstanding Mullen currently has. In its letter, it references 126 million shares outstanding from a March 31 filing. However, a more recent filing with the U.S. Securities and Exchange Commission states that Mullen has 263.27 million shares outstanding. According to math done by InvestorPlace, a cash position of $135 million/38 cents per share would leave Mullen with a shares outstanding count of 355 million.
That would be a plausible scenario. The company began the week by announcing amendments to its Series D Preferred Stock Agreement. As InvestorPlace Markets Analyst Tom Yeung notes, this meant adding essentially 297 million new shares of MULN stock. “Once the funding deal is complete, Mullen’s share count will rise from 172.5 million — based on its May 10-Q filing — to approximately 548 million if investors include a separate $20 million deal from last week,” he wrote yesterday.
However, the exact number of warrants that have been exercised remains unknown.
Why It Matters
This isn’t the first time that Mullen has issued investor communications that raised eyebrows. In late April, a company press release raised the possibility of market manipulation and illegal short selling practices. While Mullen clearly intended to quell investor concerns with these statements, it did not prove successful. MULN stock is down 87% since.
InvestorPlace contributor David Moadel speculated at the time that the press release should compel investors to approach Mullen with caution. The problems noted above regarding today’s shareholder letter should only add to that argument.
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On the date of publication, Samuel O’Brient did not have (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.
