Mullen Automotive (NASDAQ:MULN) stock opened lower by about 15% today after the electric vehicle (EV) company filed a proxy statement detailing its next special meeting of stockholders on Dec. 15. The filing only contains two proposals, of which the first is a reverse stock split in a ratio between 1-for-2 and 1-for-100. The second proposal seeks to adjourn the meeting if Proposal 1 does not receive enough shareholder votes to get approved.
The record date for the meeting has been set to the close of business on Oct. 30. Shareholders as of that date will be allowed to cast votes toward the proposals.
“[W]e expect that the primary focus of the Board in determining whether or not to effectuate the Reverse Stock Split will be the ability to obtain and maintain a continued price of at least $1.00 per share of our Common Stock on The Nasdaq Capital Market without effecting the Reverse Stock Split,” said Mullen.
MULN Stock: Mullen Proposes Another Reverse Split
As stated above, Mullen would like to first see whether shares can reach $1 organically before effecting another reverse split. This year, the company has already reverse split its shares in a cumulative ratio of 1-for-225. A 1-for-2 reverse split would bring the cumulative reverse split ratio to 1-for-450.
That could pose a problem based on Nasdaq’s standards:
“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)() and the Listing Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security.”
In other words, if Mullen conducts another reverse split in a ratio of 1-for-2 or more, it will not be eligible for a compliance period to regain the $1 mark. Still, it seems that MULN stock could satisfy the $1 requirement if its shares stay above $1 for at least 10 consecutive business days, but generally no more than 20 consecutive business days, following a potential reverse split.
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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.