Mullen

Mullen Automotive, the popular EV stock, is in trouble as the outlook for the industry continued. The shares have crashed to a split-adjusted record low of $6.93, meaning that they have crashed by over 53% in 2024. This makes Mullen one of the worst-performing stocks in Wall Street.

The EV plunge is continuing

Mullen Automotive has joined other EV companies in a strong sell-off as concerns about the industry remains. In the past few months, we have continued receiving more bad news. For example, Tesla is implementing a major recall while Volvo announced that it will stop supporting Polestar.

Mullen Automotive and other companies like Fisker, Canoo, and Faraday Future have continued falling. Interestingly, traditional automakers are still firing on all cylinders. In India, Tata Motors shares jumped to a record high while Ford and GM are making a slow recovery.

The biggest concern for Mullen Automotive is demand for its vehicles, balance sheet, and the fact that it will need to raise cash. On demand, Mullen has secured thousands of presales from Randy Marion Group.

While this is a good thing, the reality is that Randy is a vehicle dealer and not the final customer. Therefore, there is a likelihood that many actual customers will avoid Mullen’s trucks because of he ongoing jitters about EVs.

Mullen is still burning cash

Further, Mullen Automotive will likely need to raise additional cash because of its substantial cash burn. It ended the year with $155.7 million in cash, which is inadequate considering the losses it is making. The company’s loss from operations jumped to over $377 million in the last quarter. The CFO said:

“It was a year of significant headwinds in the equity market for electric vehicle manufacturers with a majority seeing a significant decrease in market values during 2023. Mullen was no exception, and the decreased market value was the primary cause of non-cash write-downs of certain assets.”

Some of these losses were because of write-downs and impairments. Nonetheless, lessons from other EVs like Polestar and Rivian means that cash burns continue for a long time after a company starts to manufacture vehicles. 

In Mullen’s case, it is unclear how it will raise capital this year because its stock has plunged hard, giving it an equity value of just $42 million. As a result, selling shares is out of question for now. Debt is also not favourable considering that interest rates are expected to remain higher for longer.

Mullen Automotive as a penny stock

Mullen Automotive stock

MULN stock chart

MULN stock is trading at $6.90 because the company made a big stock split recently. Before that, it was languishing below $1 and received a listing notification from Nasdaq. Unfortunately, there is a high possibility that the company will become a penny stock soon. While the definition vary, a penny stock is defined as when a stock crashes below $5. 

There are a few reasons for this. First, technically, the stock remains below all moving averages, a sign that bears are in control. Second, there is a risk that the company will run out of money this year because its cash burn is increasing.

Third, Mullen Automotive will not become profitable any time soon. We have seen this with many other companies like Rivian and Nio, which sell thousands of vehicles without turning a profit.

However, there is still a risk for shorting MULN stock in that it has a high short interest of 18%. The risk for this situation is that it could have a short-squeeze. Besides, the stock seems to be in the accumulation phase of the Wyckoff Method. Accumulation leads to the mark up stage where demand outeweighs supply.

By Crispus Kanyaru

With a keen eye for market trends and a knack for translating complex financial concepts into engaging narratives, Crispus has established himself as a trusted voice in the world of finance. His work has graced the pages of esteemed publications like Benzinga, Forbes, Invezz, and Banklesstimes, reaching a diverse audience eager to navigate the ever-evolving financial landscape. Crispus's journey began with a deep curiosity about the forces shaping the global economy. This natural inquisitiveness led them to pursue a degree in finance and CPIA, equipping them with a solid foundation in financial theory and analysis. But Crispus knew that knowledge alone wasn't enough. He craved to bridge the gap between dry data and real-world experiences, to make finance accessible and relatable to everyone.

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