Mullen Automotive (NASDAQ:MULN) stock is cratering after the company announced that shareholders preliminarily approved its proposal to conduct a reverse stock split in a ratio between 1-for-2 and 1-for-100. CEO David Michery stated that Mullen would soon file a Form 8-K with the final vote results.

Mullen had initially held its special meeting of stockholders on Dec. 15. During the meeting, the reverse split proposal did not receive enough votes to pass, and a proposal to adjourn the meeting to a later date went into effect. The meeting was adjourned to today for the sole purpose of soliciting more votes in favor of the reverse split proposal. Shareholders of record as of the close of business on Nov. 6 were able to cast votes toward the meeting.

Mullen has until Jan. 22, 2024 for its shares to close at or above $1 for 20 consecutive trading sessions. “In the event the Company continues to fail to meet the $1.00 minimum bid price threshold, it stands the risk of being delisted by Nasdaq,” said the electric vehicle company.

MULN Stock: Preliminary Meeting Results Show Approval of Reverse Split

Mullen has now conducted two reverse splits this year, one in a ratio of 1-for-9 and the other in a ratio of 1-for-25. That adds up to a cumulative reverse split ratio of 1-for-225. Both of these reverse splits were conducted in an effort to reach the $1 level and regain Nasdaq compliancy.

With shares trading at about 11.5 cents, Mullen would need to enact a reverse split in a ratio of at least 1-for-9 (based on the smallest whole number) to reach $1. However, that would cut it very close, so shareholders should expect a higher reverse split ratio.

Another reason to expect a high reverse split ratio is that, if Mullen enacts another reverse split, it may not be eligible for another extension period if its shares close below $1 again for 30 consecutive trading days. According to Nasdaq policies:

“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.”

Even a 1-for-2 reverse split would take Mullen’s two-year cumulative reverse split ratio to 1-for-450, making it ineligible for another compliance period and eligible for a staff delisting determination if its shares still cannot stay above $1 following another 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.