Mullen Automotive Appears to Be Nothing But Smoke and Mirrors


  • The creator of the Mullen (MULN) Five wants to play in the electric vehicle (EV) big leagues
  • The company’s prototype won’t be ready for production for at least two years
  • Investors ought to tread carefully with this EV play
The Mullen (MULN) Five vehicle is displayed at the 2021 LA Auto Show media day in Los Angeles, November, 18, 2021.
Source: Ringo Chiu /

Until this morning, I had never heard about Mullen Automotive (NASDAQ:MULN). According to InvestorPlace’s Chris Tyler, MULN stock has become the cat’s meow with the StockTwits crowd.

To me, it just looks like a well-polished marketing machine with nothing but smoke and mirrors holding up its investment thesis.

According to the company’s website, its heritage date back to 2002, and the founding of Mullen Motor Cars, the people behind the Mullen GT supercar. I guess that’s impressive.

Mullen’s website says the following about the company: “Mullen has created an end-to-end ecosystem which takes care of all aspects of EV ownership, right from research to financing to servicing.”

Again, very impressive. But what does it really mean? I’ll explore whether the EV wannabe is ready for primetime.

MULN Mullen Automotive $2.35

MULN Stock Is on Fire

A month ago, the company’s shares were trading around 63 cents. They’re up more than 430% since — no wonder the StockTwits crowd is enthralled. The question is whether it stays on fire.

Mullen completed its reverse merger with Net Element on Nov. 9, 2021. That in itself is quite the backstory.

Net Element merged with Cazador Acquisition Corp., a special purpose acquisition company (SPAC), in October 2012. Net Element was into mobile commerce payment processing, and it operated some Russian websites.

Chairman Kenges Rakishev in October 2012 stated:

Net Element International, with its extensive global network and high-level business dealings with Russia, Kazakhstan and other CIS countries, is ideally positioned to capitalize on the region’s booming technology marketplace and bring value to our shareholders

In 2012, Net Element had revenue of $1.41 million from payment processing fees. However, it lost $16.4 million that year. By 2020, that revenue had grown to $65.7 million with a $5.9 million loss and $77.8 million in federal and state net operating losses (NOLs) carryforwards.

So, Net Element managed to grow its business over the past eight or nine years, but clearly, the tax losses were the attraction for Mullen.

When Mullen first announced the reverse merger with Net Element in August 2020, it said it expected to launch the Dragonfly K50 luxury sports car in the first half of 2021. That didn’t happen.

Mullen’s stock might be on fire, but its business sure isn’t.

Two Years Until Mullen Five

It took Mullen and Net Element 15 months to complete their reverse merger in November. However, it introduced the Mullen Five EV crossover at the Los Angeles International Auto Show a week later.

As my colleague pointed out, production of the Mullen Five won’t begin until third quarter 2023, with deliveries starting in the second quarter of 2024. That’s a little more than 27 months until showtime for the $55,000 EV.

Mullen has missed virtually every goal it’s set for itself. The production timeline is unlikely to be any different. As I look at the company’s 10-Q for Dec. 31 2021, it had approximately 611 $100 reservations for the Mullen Five. If it delivers on all 611 EVs, that’s almost $34 million in cash from the sales.

It’s a start but nowhere near what it needs to keep the ball moving ahead.

InvestorPlace contributor Mark Hake recently recommended that readers avoid MULN stock because it has serious cash problems. How serious? At the end of December, it had just $360 of cash on its balance sheet.

To make matters worse, according to Hake, it has a $30 million equity line of credit at its disposal that allows the company to drawdown up to $2.5 million per month by issuing stock to Esousa Holdings LLC at 95% of the volume-weighted average price of its stock for the 10 days following a drawdown.

But wait! It Gets Worse!

But that’s not the worst part.

To calculate the shares issued — let’s assume the drawdown is $2.5 million and the 10-day volume-weighted average price of its stock is $3.50 — you multiply $2.5 million by 125%, which equals $3.125 million. You then divide $3.125 million by $3.325 (95% of $3.50), which comes to 939,850 shares the company must issue to satisfy the drawdown.

Mullen is paying the equivalent of $789,474 (939,850 multiplied by $3.50 less $2.5 million) for $2.5 million. However, as my colleague says, Mullen doesn’t care if they dilute shareholders because they get the cash.

Investors Ought to Tread Carefully With MULN Stock

There is no question that the Mullen Five is an attractive EV. There is also no question that it ought to be a popular choice given its price point of $55,000.

However, to get to 2024, it’s got to come up with more than $30 million in cash because these EVs don’t just make themselves appear on request. So it takes a very expensive buildout, even if you’re planning to outsource production as Fisker (NYSE:FSR) wants.

Care to guess how much cash Fisker has on its balance sheet now? $1.4 billion.

Mullen’s math doesn’t add up. Therefore, I would tread very carefully with MULN stock. You might get burned.

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On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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