Shares of Mullen Automotive (NASDAQ:MULN) stock are accelerating over 30% higher after the company disclosed that it had adopted a poison pill plan. A poison pill plan is a strategy to deter another investor or investment firm from acquiring a large stake in a company. In the case of Mullen, this stake is defined as 10% or greater. As Mullen explained:
“The Rights Plan is designed to enable all Company stockholders to realize the long-term value of their investment and is intended to protect Mullen and its stockholders from efforts by a single stockholder or group to obtain control of the Company without paying a control premium.”
MULN stock is down by 99% year-over-year.
As part of the plan, Mullen has declared a dividend distribution of one right that will be payable to shareholders as of the close of business on May 13. Only the right will be distributed to shareholders, as the distribution does not contain any direct monetary benefits. The rights will expire on May 1, 2025, if not redeemed or exchanged in full before then.
MULN Stock: Mullen Launches Poison Pill Plan
The rights’ distribution date is variable, and they can not be exercised until on or after that date. Exercising one right would result in the purchase of one ten-thousandth of a share of Series A-1 Junior Participating Preferred Stock at a variable purchase price of $30. This partial share gives the shareholder approximately the same dividend, voting and liquidation rights as one share of MULN.
The date will be the earlier of:
- 10 days after an investor or investment firm publicly discloses a 10% or greater stake.
- 10 business days after a tender offer or exchange offer that would result in the investor or investment firm acquiring a 10% or greater stake.
Mullen also describes triggering events that could result in a change of exercise of rights. One of these events, called a “Flip-in Event,” notes that each right holder would receive a “value equal to two times the Purchase Price” in the event an investor or investment firm acquires 10% or more of common stock outstanding.
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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.
