Mullen Automotive (NASDAQ:MULN) stock is in focus after the company released proposals for its annual meeting of stockholders on Aug. 3. Front and center is Proposal 4, which seeks approval for a state of incorporation change to Maryland from Delaware. The electric vehicle (EV) company had previously proposed this change in a prior special meeting of stockholders, which led to a MULN stock shareholder filing a class action lawsuit. The lawsuit was later dropped, but resulted in Mullen rescinding the proposal.
“If it is successful in causing Mullen to reincorporate in Maryland, the board will have made it more difficult for stockholders to bring action against its members,” said the shareholder who filed the class action. “It will also gain the ability to change the number of authorized shares of Mullen stock without seeking stockholder approval.”
MULN Stock: Proposed Move to Maryland Draws Controversy
Mullen provides several reasons for its proposed move to Maryland in its proxy statement. The first is that Maryland will allow its board to increase or decrease the number of authorized shares of any class of stock without a stockholder vote. Mullen explains:
“Such a provision provides the Board and the Company increased flexibility in accessing the capital markets promptly because the time necessary to obtain stockholder approval of such an increase in authorized stock is eliminated.”
The company adds that it spent $927,000 last year seeking stockholder approval for a reverse stock split and for increasing the number of authorized common stock.
Mullen’s second reason for moving to Maryland is that it will be able to initiate a reverse stock split in a ratio no more than 1-for-10 in a 12-month period without the approval of stockholders.
“Such a provision provides the Board and the Company increased flexibility to reduce in a proportional manner its outstanding shares of stock, potentially providing financing and capital markets benefits,” said Mullen. “The Maryland Charter will not deny this power and, therefore, the Board will have this power.”
Another reason to make the move is that Maryland does not have a franchise tax for corporations. During the fiscal year ended Sept. 30, 2022, Mullen paid roughly $130,000 in Delaware franchise taxes.
Finally, other reasons for the move include the elimination of appraisal rights, the flexibility of distributions and stockholder protections in the event of an “unsolicited takeover attempt.”
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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.
