Mullen Automotive (NASDAQ:MULN) will soon trade at a much higher price, as the electric vehicle (EV) company has announced a 1-for-100 reverse stock split, effective as of Dec. 21. The reverse split will bring Mullen’s cumulative reverse split ratio in 2023 to 1-for-22,500 following a 1-for-25 and 1-for-9 reverse split earlier this year. No fractional shares will be issued through the reverse split. Instead, fractional shares will be rounded up to the nearest whole share.
Mullen seeks to reverse split its shares for a third time in order to regain compliance with Nasdaq’s minimum bid requirement of $1. In order to regain compliance, MULN must close at or above $1 for 20 consecutive business days by Jan. 22, 2024. MULN stock faces being delisted from the Nasdaq if it is unable to achieve this.
MULN Stock: Mullen Announces 1-for-100 Reverse Split
In a letter to shareholders, CEO David Michery acknowledged the impact of another reverse split on shareholders and also hinted at raising capital in 2024:
“As mentioned, I did not come to this decision lightly and certainly took no pleasure in taking these initiatives, but in order for the Company to survive and prosper, which is certainly in the best interests of all shareholders, the Company needs to raise capital in 2024 to fund initiatives until such time as it is cash flow positive.”
A trip to the over-the-counter (OTC) market for MULN stock would carry several consequences. First, liquidity in OTC markets is much lower, while funding is also harder to receive. “Most sources of capital are not willing to provide financing to the Company if it is no longer on a major national exchange,” said Michery. On top of that, OTC stocks are generally viewed with negative sentiment, as many stocks trade over-the-counter due to noncompliance issues with major exchanges.
Furthermore, Michery’s disclosure of raising capital next year has troubled shareholders, as Mullen has previously raised capital by diluting shareholders. This statement has been enough to send MULN to a new 52-week low of 8.33 cents today.
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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.
