Mullen Automotive (MULN) stock jumped 18% at the start of trading on Wednesday’s regular session, rising from $0.16 to $0.19. This was impressive since the stock lost 29.9% of its value on Tuesday.
Despite a letter on June 15 that attempted to calm shareholder worries, CEO and founder David Michery sold more than 2 million shares of common stock last Friday, June 21, which appears to have triggered Tuesday’s plummet in the share price.
CEO David Michery sold 2,090,979 shares of the electric vehicle company on June 16, according to a filing with the Securities & Exchange Commission (SEC). These shares were exercised on a day when the MULN price closed at $0.2616. This means Michery took home at least $547,000.
Michery actually had another 541,813 shares expire worthless due to his 2022 performance stock award compensation that required the MULN share price to hold above a certain level. However, as Michery himself admitted in a letter to shareholders on June 15, Mullen stock has lost 90% of its value just since March 31 of this year.
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The heavy implosion of the share price was largely due to the extreme level of dilution going on. Mullen has been funding its pre-revenue operations by selling common stock and warrants at a blistering speed. Just the previous week, Mullen announced 586 million shares of common stock and warrants for common stock in order to fund its production ramp-up. This meant dilution of more than a third in the span of a few days.
In his letter to shareholders, Michery wrote: “We want to respond to the many emails and calls regarding the decrease in our share price. Since March 31, 2023, our stock has declined 90% from $3.25 per share. On June 13, 2023, the Company’s common stock closed at $0.32 per share. The Company currently trades at a discount to its current cash position of $135 million or $0.38 per share.
“Despite the decline in stock price, management believes we are in position to meet the previously announced objectives for moving first into the production and then sale of our Class 3 commercial vehicles during the quarter ending Sept. 30, 2023.”
Following that letter to shareholders last Thursday, Michery’s immediate sale of more than 2 million shares on Friday produced a run on the stock this Tuesday. The company is now valued at a market cap of $39 million and looks to be headed toward bankruptcy if nothing changes. Of course, Mullen has survived for more than a decade by finding a steady stream of willing investors, so let’s just see if Michery can wriggle out of this situation.