On Jan. 23, Mullen Automotive (NASDAQ:MULN) had its hearing at Delaware’s Court of Chancery. This followed two lawsuits that claimed that shareholders didn’t vote in favor to increase authorized common stock at Mullen’s 2022 annual meeting on July 26.
Mullen believed that its proposal to increase authorized shares was valid, explaining that “Mullen filed and effectuated the Amendment with a good faith belief that the Amendment was validly approved by the stockholders of the Company,” and that “Mullen has treated the Amendment as valid, and has, among other things, issued Securities in reliance thereon.”
However, with lawsuits calling this proposal into question, the EV company sought to gain the Court of Chancery’s approval. Under Section 205 of the Delaware General Corporation Law (DGCL), companies are allowed to request a court to determine the validity of a corporate act.
InvestorPlace obtained documents related to the hearing through File & Serve Xpress, a service available through the Delaware Court of Chancery. Let’s get into the details.
MULN Stock Alert: What Happened in Court?
A judicial action form filed Jan. 23 states:
“Bench Ruling Granting the 205 Petition. Counsel are to confer and submit proposed order lifting Status Quo.”
Essentially, the judge concluded that the vote to increase authorized common stock was valid. Attorneys will now prepare a proposal that would lift its status quo order. This status quo order prevented Mullen from acting upon the results of its special meeting of shareholders.
What Comes Next for Mullen
The result of this hearing is extremely important for the future of Mullen. With the approval of the court, the company can now act on special meeting Proposal No. 1, which involves a reverse stock split in a range between 1-for-2 and 1-for-25. Mullen announced today that shareholders had approved Proposal No. 1.
A reverse split can help Mullen achieve the $1 price it needs to stay listed on the Nasdaq exchange. In addition, since Mullen is a member of the Russell 2000 index, the price of MULN must be at least $1 during the rank day in May in order to maintain inclusion.
Lastly, Mullen will also be able to act on Proposal No. 2. This proposal involves increasing authorized common stock to 5 billion from 1.75 billion. Increasing authorized common stock will allow the company to issue additional shares to support its business. Mullen will disclose the preliminary votes for the proposal during its meeting tomorrow.
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.
Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.
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