EV Firm Mullen Sues Schwab, TD Ameritrade for Inflating Number of Shares

(Bloomberg) — Mullen Automotive Inc. has accused brokerages TD Ameritrade and Charles Schwab of facilitating naked short selling and damaging the electric-vehicle company’s stock price.

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Mullen, which plans to make both commercial and passenger electric vehicles, claims 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. In a lawsuit filed Tuesday in federal court in New York, Mullen alleges the brokerages, including Fidelity Investments’ National Financial Services, sold those shares without actually borrowing them in the first place.

Their “conduct injected false and misleading information into the market by indicating that there were more Mullen shares available for trading than existed,” the company said in the lawsuit.

Mullen shares began dropping in February and are down 99% year-to-date.

A spokesperson for Schwab said the company was aware of the lawsuit but hadn’t yet reviewed it. Fidelity declined to comment.

Mullen alleges the unlawful trading took place shortly after the company executed a 25-to-1 reverse split in May, which led to a reduction of the 3.7 billion shares outstanding to 152 million shares. The company is seeking unspecified damages as compensation.

“Companies have duties and obligations to their shareholders to monitor whether their company is being targeted and to take appropriate legal steps to protect the value of their shareholders equity,” said Alan M. Pollack, partner at Warshaw Burstein, who filed the complaint. “Mullen is one of those companies that understands its obligations and is doing something about it.”

The Brea, California-based company began trading on the Nasdaq in November 2021 after merging with a listed payments company. Since then, Mullen has acquired a number of its struggling peers, like bankrupt Electric Last Mile Solutions, Inc., and the privately-held Bollinger Motors.

–With assistance from Silla Brush.

(Updates with the inclusion of Fidelity Investments’ National Financial Services as a named defendant and a comment from Mullen’s legal representation starting in the second paragraph.)

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