Mullen Automotive (MULN) stock price has come under intense pressure in the past few years. The stock has dropped by more than 99% in the past 12 months. It has also fallen by 70% this year, making it one of the worst-performing companies in Wall Street.

Fisker is collapsing

Mullen Automotive has had a dramatic fall from grace. At its peak, the company was valued at over  $700 million. Over the years, the company implemented several acquisitions as it sought to become a major player in the electric vehicle (EV) industry.

It acquired Electric Last Mile Solutions (ELMS) in a deal valued at over $105 million in cash. This buyout gave Mullen a manufacturing facility in Indiana. It then acquired Bollinger Motors and Romeo Power, a battery company.

In all, Mullen Automotive has spent over $400 million in these acquisitions. Today, the company has a market capitalization of just $29 million, meaning that investors don’t see any value in it. These buyouts bring memories of Teladoc, which acquired Livongo Health for $18 billion. Today, Teladoc is valued at $4 billion.

The biggest EV story of this week is the ongoing collapse of Fisker Automotive, as I had predicted here. The company ended its talks with Nissan, which was considering investing in it. It also expressed concerns that the recently announced $100 million funding will not materialize.

Fisker has suspended vehicle manufacturing for six weeks, meaning that its cash burn will continue. The New York Stock Exchange (NYSE) has also delisted the company because of its low stock price.

Therefore, there are concerns that Mullen Automotive could be the next EV company to collapse as its cash burn accelerates. The most recent results showed that Mullen’s net loss narrowed to $61 million from $376 million in the same period in 2022. 

The challenge is that the company will continue burning its cash in the foreseeable future since it ended last quarter with $88 million in cash and short-term investments. As such, it needs to raise additional cash soon if it is to continue as a going concern.

On the positive side, Mullen Automotive has started to deliver its trucks to Randy Marion Automotive. It is now selling Mullen One and Mullen Three. As for now, it is unclear whether there is real customer demand for these vehicles.

Also, Mullen is spending money developing its Five RS high-performance vehicle. It will have over 1,000 horsepower and a maximum speed of over 200 miles per hour. As we have seen with other EV companies, developing and selling vehicles is expensive. 

This explains why companies like Rivian and Lucid have never turned a profit. Luckily for these companies, they have a strong balance sheet, with Rivian having over $10 billion in cash. Lucid Motors is backed by Saudi Arabia, a country with unlimited money. Mullen Automotive lacks these resources.

Is it safe to buy Mullen stock?

Mullen Automotive

I believe that Mullen Automotive is a highly-risky stock to invest in. It has a thin balance sheet and is continuing to incinerate cash at fast pace. Most importantly, the company is in an industry that is going through a slow burn, as evidenced by the performance of stocks like Tesla and Nio.

Therefore, I believe that Mullen stock will continue falling as the company continues its substantial challenges. I also expect it to struggle to raise capital, which it needs. Its only option for now would be to raise debt financing and I believe that no lender will be comfortable lending to it after seeing the Fisker debacle. 

The only hope for Mullen Automotive is where it goes through a short-squeeze as we have seen with Canoo recently,

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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