Mullen Automotive (NASDAQ:MULN) enacted a 1-for-9 reverse stock split on Aug. 11 in order to satisfy Nasdaq’s minimum price requirement of $1. This was the electric vehicle company’s second reverse split this year. The first, a 1-for-25 reverse split, became effective on May 4 and was enacted in order to reach Nasdaq’s $1 threshold as well.
In order to regain compliance with Nasdaq, MULN stock must close above $1 for at least 10 consecutive business days, but generally no more than 20 consecutive business days. MULN closed above $1 on Aug. 11, 14, and 15, marking three consecutive business days. However, shares have closed below $1 for the past two business days. Mullen is running on a tight schedule as well, as it must satisfy Nasdaq’s $1 price requirement by Sept. 5.
Between today, Aug. 18 and Sept. 5, there are only 12 business days. Sept. 4 is removed from the equation because the stock market is closed on Labor Day.
MULN Stock Breaks Streak of Closing Above $1
Shares of Mullen traded to a new 52-week low of 63 cents this morning, a far reach from $1. This comes despite the commencement of the company’s $25 million buyback program. Mullen has disclosed that it has already used up $3.62 million of the program to repurchase MULN stock. On top of that, CEO David Michery disclosed purchasing 102,040 shares at an average price of 98 cents per share on Aug. 16.
This hasn’t been enough to help MULN stock close above $1, which has shareholders questioning if another reverse split is on the horizon. However, another reverse split may be problematic, as Mullen’s cumulative reverse splits this year have totaled 1-for-225. According to Nasdaq:
“Notwithstanding the foregoing, if a Company’s security fails to meet the continued listing requirement for minimum bid price and the Company has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the Company shall not be eligible for any compliance period specified in this Rule 5810(c)(3)(A) and the Listing Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security.”
If Mullen had initiated a 1-for-10 reverse split instead of a 1-for-9, its cumulative reverse split ratio would have totaled 1-for-250. This would have made it ineligible for a compliance period. As a result, it appears that Mullen can no longer lean on additional reverse splits in the near term to help get its shares above $1.
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.
