Last Friday, Mullen Automotive (NASDAQ:MULN) stock closed below $1. That poses a significant problem for the electric vehicle (EV) company, as it will receive a deficiency notice if its shares close below $1 for 30 consecutive business days. MULN stock is down by about 9% today.
In the past, Mullen has used reverse splits to regain the $1 price level. In 2023, the company initiated three reverse splits: a 1-for-25, a 1-for-9 and finally a 1-for-100. That adds up to a cumulative ratio of 1-for-22,500.
Usually, when a stock closes below $1 for 30 consecutive business days, the Nasdaq provides the company with a 180-calendar-day grace period. During that time, a stock can regain compliance if it has a closing price of at least $1 for at least 10 consecutive business days. In certain situations, the Nasdaq will require the stock to close at $1 or above for more than 10 consecutive business days.
MULN Stock: Mullen Sinks Below $1 (Again)
If Mullen closes below $1 for 30 consecutive business days, its options are limited. According to Nasdaq:
“However, pursuant to Listing Rule 5810(c)(3)(A)(iv), 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 a 180-day compliance period and the Listing Qualifications Department shall issue a Staff Delisting Determination.”
As of now, Mullen’s two-year cumulative reverse split ratio is 1-for-22,500, way above the 1-for-250 threshold set by Nasdaq. As a result, Mullen will not be eligible for a grace period to recover the $1 level and will receive a delisting determination.
In other words, the company has used up its reverse splits and can no longer utilize them to regain compliance with Nasdaq’s minimum bid price requirement. This situation only applies if MULN closes below $1 for 30 consecutive business days, which it has not yet done.
The fall in MULN isn’t exactly surprising, given that the company generated $0 of revenue during the first quarter with a net loss of $171.36 million. The number of shares outstanding has also risen by 7,358% year-over-year, according to Stock Analysis.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
