Mullen Automotive Inc. (Nasdaq: MULN), a Brea-based maker of electric vehicles, said it’s suing major broker dealers, alleging a scheme to manipulate its share price through a tactic known as naked short trading.
The lawsuit, filed in the Southern District of New York against TD Ameritrade, Charles Schwab, National Finance Services and others, seeks compensatory damages and injunctive relief.
Shares of Mullen fell 2.2% to 58 cents and a $107 million market cap. The stock, which is down from a 52-week high of $19.75, has an average volume of 273.6 million shares traded in the past 30 trading sessions. Mullen said it only has 152 million shares available for trading.
“MULN is one of the largest traded stocks on the Nasdaq and it has seen a precipitous decline in value despite announcements highlighting many company successes,” Mullen’s Chairman and Chief Executive David Michery said in a statement. “I have been extremely frustrated by the performance of our stock and long suspected illegal short selling activities.
“We believe the company and its shareholders have been significantly harmed by certain traders and their brokers and market makers, such as the named defendants in the lawsuit, that have facilitated this unlawful conduct,” he said.
The lawsuit alleged that the brokerage firms and around 10 individual unidentified broker dealers illegally sold over 34 million “fictitious” company shares and “fully paid-for” stock owned by Mullen shareholders. Mullen alleged the brokerages sold those shares without actually borrowing them in the first place, a practice known as naked short trading.
Christian Attar Senior Partner Wes Christian, one of Mullen’s lawyers, said the defendants are involved in efforts “to destroy Mullen’s share price by engaging in an abusive short selling scheme. This scheme was intended to inject false and misleading information about Mullen into the market which has caused many shareholders to sell their investment in Mullen.”