Mullen Automotive Inc (MULN)

[shamalamadingdong]

I found this post on Reddit/ MULN board that explains the cashless warrants that are being exercised right now, the warrants were never available to retail, and basically, the lower the share price is the more shares that the warrant holders get when they exercise the warrants because of the Black Scholes value, and the additional $3.00 MULN included in the deal. Here is the link, https://www.reddit.com/r/Muln/comments/u8x0sg/about_that_884_exercise_price_for_those_196m/

Some basics first: Warrants are a bit like options, in that the warrant holder has the right to purchase shares at a set price (the exercise price) at some point in the future before the warrant expires. The current exercise price for warrants is $8.84, as set in the amendment filed on Feb. 10, 2022. So in a normal warrant exercise, the holder pays $8.84 and gets 1 common share for each warrant exercised.

In contrast, cashless exercise means that the warrant holder receives an adjusted number of shares for each warrant and does not pay any additional cash for the exercise (hence, cashless). The calculation of how many shares a warrant holder receives for each cashless warrant exercise is described in the 10-K Annual Report filed Dec. 29, 2021, and shown in the screenshot below.
The HUGE confounding factor though is the fact that in the amendment Mullen included an additional $3.00 to the calculated Black Scholes value when determining the net shares resulting from the cashless exercise of warrants. Here's what this does to the net shares received per cashless warrant redemption:

Stock Price Black-Scholes + $3 Net Shares
0.68 3.43 5.04
1.35 3.95 2.93
1.5 4.07 2.71
1.8 4.32 2.40
2.5 4.92 1.97
5 7.14 1.43
7 8.97 1.28
8.84 10.68 1.21
10 11.77 1.18
12 13.65 1.14
15 16.50 1.10