- Mullen is suing TD Ameritrade, Charles Schwab, National Finance Services for alleged stock manipulation.
- MULN stock has lost the initial share price gain from the lawsuit announcement.
- NASDAQ 100 futures have ticked slightly higher on Thursday.
- Mullen is represented by Christian Attar and Warshaw Burstein law firms.
Mullen Automotive (MULN) stock rose 1% at the start of trading on Thursday, alongside the NASDAQ Composite that has risen nearly 0.5% as the market views a November interest rate hike as less and less likely. MULN shed 5.2% on Wednesday despite the announcement earlier in the week that the company was suing several of the nation’s largest brokerages for alleged stock manipulation.
The lawsuit comes on the heels of Mullen’s inability to keep its share price above $1.00 – the level required for ten consecutive sessions leading up to September 5 in order to remain listed on the NASDAQ exchange.
MULN closed Wednesday at $0.5641 per share.
Mullen stock news
On Tuesday, Mullen management announced the lawsuit brought through lawyers hired from law firms Christian Attar and Warshaw Burstein in the Southern District of New York. The EV automaker argues that TD Ameritrade, Charles Schwab, National Finance Services and others were “engaged in a scheme to manipulate the share price of [Mullen’s] securities.”
“I have been extremely frustrated by the performance of our stock and long-suspected illegal short-selling activities,” said Mullen CEO David Michery in a statement.
The “illegal short-selling activities” specified by Michery likely involve what is termed “naked short-selling”. This is when a short-seller bets against the stock price of a security like MULN without first borrowing the shares on the open market.
Earlier this summer, Mullen had already hinted that the lawsuit was in the making as Michery had announced the hiring of the Share Intel firm to research whether or not an illegal short-selling campaign was taking place.
None of the brokers commented on the ongoing lawsuit, for which Mullen is seeking compensatory damages. The news initially sent MULN stock up above $0.67 on Tuesday before selling off for a slight loss in the session.
The same day Mullen said it had so far spent $5.6 million of its $25 million board-approved buyback policy, which runs through the end of the year, in order to repurchase common stock. The company repurchased 2 million more shares since announcing the purchase of 3.7 million shares on August 17.
However, the repurchase scheme would seem to be too little, too late as the company needed to push its share price above $1.00 by August 23 in order to meet the strictures of the NASDAQ exchange for remaining listed. The exchange told Mullen management back in May that it would need to keep its share price above that level for ten consecutive trading sessions before September 5 in order to remain listed. Despite two reverse stock splits in 2023, Mullen has been unable to achieve price stability above the $1.00 level.
Penny stocks FAQs
Originally, penny stocks were any stock that traded for less than $1, i.e. pennies. The Securities & Exchange Commission has since altered the definition to include any stock that trades for less than $5. Penny stocks are typically associated with small companies that have either experienced poor results, sending their share price down, or with companies who dilute their share price by issuing lots of shares over time in order to fund operations or acquisitions.
Some penny stocks trade on respected exchanges, such as the NASDAQ or the NYSE. Examples of these are Mullen Automotive (MULN) and Bark (BARK). Those exchanges have requirements though. For the NYSE, listed stocks must have 1.1 million publicly traded shares outstanding with a market value of at least $40 million. The NASDAQ requires a share price minimum of $4, a minimum of 1.25 million shares and a market cap of $45 million. Most penny stocks, however, trade on the OTC (over-the-counter) market. This may mean the OTC Bulletin Board or the privately-owned OTC Markets Group.
Quite often the sharpest movers on any normal trading day are found among penny stocks. This is because non-penny stocks tend to have more liquidity, and the market is more certain about larger companies’ long-term values. Penny stocks are illiquid, meaning there is little supply available if an announcement drives more buying demand into a particular stock. There are no market makers that hold large amounts of penny stocks just to dispense them at a slightly higher price point. Additionally, most of these penny stocks suffer from a news desert where few market players know anything relevant about them. This is why a small biopharma company can issue news about a successful drug trial and immediately rocket 500% higher, with no analysts on Wall Street covering it.
Typically, the answer is “No”. Penny stocks are more risky than higher-priced stocks on average. Penny stock investors have a higher chance of losing their capital by investing in weaker companies. There is a reason why they are penny stocks in the first place, which is that largely the mainstream market is not interested in investing in them. Two groups of investors tend to focus on penny stocks, however. The first group are day traders, who know that the lack of liquidity in penny stocks could lead to extremely large swings over a short time period. The other group is made up of investors who like the fact that these stocks are disregarded. This allows these investors to gain an advantage by benefiting from upcoming announcements, because the larger market is not paying attention.
Mullen stock forecast
Mullen stock has been unable to sustain any stock rally in 2023 after an extremely dilutive bout of management’s renewed share sales. Now that MULN is headed to the pink sheets or over-the-counter market, even fewer shareholders want to hang onto the stock. Expect MULN to retouch and then break through the $0.39 floor created on August 23.
MULN daily chart
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