In a virtual stockholder meeting today, EV hopeful Mullen Automotive announced that shareholders had approved a proposal to increase authorized common stock from 1.75 billion total shares up to 5 billion total shares.
Mullen had been expected to vote on the proposal a week ago, but cited two ongoing legal cases regarding the manner in which the company had issued stock during 2022 as reason for the delay. On Monday, the Court of Chancery Delaware ruled that Mullen’s decision to authorize more common stock on July 26th, 2022 was legitimate, effectively freeing the company to authorize more today.
At the very end of today’s virtual meeting, Mullen also indicated that even though the company had approved a reverse stock split last week, there were no immediate plans to execute it, suggesting that the dilution will come first. This order of operations would free up Mullen’s leadership to sell the new shares to generate cash in the short term while keeping the option to reverse split in their back pocket for use in the future.
Barring some unannounced change to the company’s fundamentals or business prospects, a reverse split will likely be the only way for Mullen to raise its share price north of $1, which is required to remain listed on the Nasdaq and the Russell 2000 Index.
There are two important dates to watch here. Mullen would be delisted from the Nasdaq on March 6, 2023 for failing to trade above $1, but the company can file for a 180 day extension at that time. Mullen faces delisting from the Russell 2000 on June 23rd, when all the Russell Indexes are reconstituted.
Whether Mullen can raise its share price organically in the meantime remains to be seen. The stock is down 90% in the last year, but had risen 16% (to $0.34/share) on the news of the increased volume of common stock.
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