Mullen Stock Tempts Fate, Gets Burned

Someone needs to tell Mullen Automotive (NASDAQ:MULN) about “knocking on wood” to avoid bad luck.

On Thursday last week, the California-headquartered electric vehicle start-up announced to great fanfare (and in case you missed it, ­re-announced a day later) that, after completing a 1-for-25 reverse share split on May 3, the company’s shares had successfully traded above the $1 threshold required to maintain a Nasdaq listing for 10 consecutive days.

Prior to undertaking its reverse stock split, you see, Mullen shares had been sinking steadily, to the point where they ultimately were selling for a lowly $0.06 per share — making Mullen literally a “penny stock,” and therefore not qualified to continue trading on the Nasdaq, which requires that stocks maintain at least a $1 bid price.

Mullen issued a flurry of press releases, both before the reverse split and afterwards, describing plans to soon begin producing multiple models of electric vehicles, and indeed announced contracts worth hundreds of millions of dollars to purchase such vehicles. Despite these efforts, Mullen has been unable to attract enough buyers to raise its share price organically. So instead, for each Mullen shareholder owning shares, the company exchanged 25 six-cent shares of Mullen Automotive for one new share worth 25x as much — $1.50 — to artificially raise its per-share price.

And yet, Mullen’s problems continue.

Despite claiming victory in its quest to lift its share price past $1 and secure its Nasdaq listing, Mullen’s share price has continued to deteriorate after the reverse split. Today, Mullen shares dropped below the $1 mark.

So what would that mean for Mullen? It depends.

On the one hand, Mullen did technically fulfill the Nasdaq’s requirement to trade above $1 per share for 10 consecutive days. As the company explained in its press release, it is currently waiting for “confirmation from Nasdaq that it meets Nasdaq’s requirements for continued listing,” and a plain reading of Nasdaq Listing Rule 5810(c)(3)(A)(ii) suggests that such confirmation may be forthcoming.

One the other hand, however, this same rule states that failure to maintain a $1-plus bid price “for a period of 30 consecutive business days” may result in Nasdaq issuing Mullen another deficiency notice immediately after admitting that Mullen had cured the previous deficiency.

Mullen’s already on the brink of breaching that requirement. If it does, then logically, this would reset the clock, and require Mullen to find a way to raise its share price back above $1 within 180 days all over again — whether by delivering on its promises to begin producing and selling EVs, and turning itself into a viable business, or by … conducting another reverse share split.

Long story short, Mullen’s not out of the woods just yet, folks. Better buckle up for more volatility in this once and future penny stock.

Overall, MULN has a Smart Score of 1 (out of 10) on TipRanks, meaning that it is likely to underperform the market. (See MULN stock analysis)

Smart Score is TipRanks’ proprietary quantitative stock scoring system that evaluates stocks on eight different market factors. The result is data-driven and does not involve any human intervention.

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