Shares of Mullen Automotive (NASDAQ:MULN) continue to fall lower after the electric vehicle (EV) company was removed from the Russell 2000 Index. In the past five days, MULN stock is down about 40%.
Mullen was removed from the index because it failed to achieve a price of at least $1 on FTSE Russell’s rank day, which occurred on April 28. An existing member could also be considered for eligibility if its average daily closing price over the past 30 days is $1 or greater. Unfortunately, Mullen failed to satisfy either requirement.
The reconstitution of the Russell 2000 took place on June 23, which means that MULN has already been removed from the index.
MULN Stock Continues Its Decline
Mullen’s removal from the Russell 2000 and any correlated indices can have the negative effect of creating downward pressure on MULN. This can occur because the indices must sell out of their stake in the company.
Meanwhile, Mullen is trading at a market capitalization of around $30 million, despite it announcing yesterday that it had over $235 million in cash and cash equivalents. This cash figure should be able to sustain operating capital for the next two years.
“We are in the best financial position in our Company’s history and remain fully committed and highly focused on producing, selling and delivering our vehicles to our customers prior to the end of 2023,” said CEO David Michery. In addition, Mullen pointed out that its real estate and assets are unencumbered, or free of claims, except for $7.3 million in outstanding debt.
Earlier this month, Mullen disclosed a moratorium on new financings for the remainder of the year, as well as having sufficient capital for at least the next 12 months. In addition, Mullen’s cash value per share was 38 cents as of June 13, which fell from 68 cents compared to March 31.
Dilution seems to be the major issue behind Mullen’s decline, and it doesn’t seem to be over yet. On June 26, the EV company announced a resale of up to 2.33 billion shares. Shares of common stock outstanding as of June 22 totaled 643.37 million, which means that a completion of the resale in whole would spike shares outstanding even further.
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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.
