Best of Luck to Mullen Automotive, Farewell Now to the Stock

Mullen Automotive Inc. (NASDAQ:MULN) stock is an emerging electric vehicle (EV) maker. And it is a speculative stock, a penny stock that just found a clever way to avoid a massive risk — the risk of getting delisted from Nasdaq.

A photo of an electric car with the charger plugged in.
Source: Nick Starichenko/InvestorPlace.com

It is also “a Southern California-based automotive company that owns and partners with several synergistic businesses working toward the unified goal of creating clean and scalable energy solutions.”

In a world that evolves so fast and news in the stock market is so abundant, it is important to remind you that back on Aug. 31, 2021, Net Element, Inc. merged with Mullen Automotive.

Net Element operated “a payments-as-a-service transactional and value-added services platform for small and medium enterprises (“SMEs”) in the U.S. and selected emerging markets.”

On top of that, Net Element was using blockchain technology solutions and back in 2017 was among the fastest-growing companies in North America on Deloitte’s 2017 Technology Fast 500 list. What do global electronic payments have to do with building electric cars?

We live in a free world, at least for most people. In this free world, businesses can merge to transform into something new. But would you rather invest in a merger of two companies that know their industry inside out or in a merger of two uncorrelated companies like Net Element and Mullen Automotive? This is not a rhetorical question.

Crazy Things Have Retuned to the Stock Market

Mullen Automotive wants to bring its Mullen FIVE model to the market by 2024. In the meantime, it makes zero revenue.  I do not feel surprised by the year-to-date loss of nearly 58% for MULN stock, I feel too anxious to understand why there has been a rally of approximately 40% in the past five days as of March 15, 2022. There is an explanation for this rally, which I find funny and highly questionable about whether it will be sustainable.

So, the explanation for the rally of MULN stock is that Mullen was featured on CarBuzz and there was an update about the retail market strategy and manufacturing plans.

Let’s distinguish between material and not material public information at this point. Material information is important information that investors should know as it will probably move the stock price of a public company.

The announcement of  “key partnerships with hofer powertrain, Comau, ARRK, Dürr, and DSA Systems for EV powertrain, engineering, manufacturing, vehicle production systems, and Over the Air (OTA) and vehicle system diagnostics, respectively. The Company expects these strategic developments to play a crucial role in bringing the FIVE to market with the latest technology and in the least amount of time.”  As the production phase is getting closer, the company will start generating revenue.

Mullen Automotive plans to put the FIVE model on the market in 2024. I must give credit to CarBuzz as it is a website for the latest news about cars and it covered this emerging EV company as it should. At the start of the article, there is the phrase “cynical mindset”.

I am not of a cynical mindset but the rally due to this positive media coverage has no depth at all at this moment. Here is why. First, Mullen plans to price the FIVE model as a luxury model with a tag price, a base price of $55,000. Then it plans to make an RS model, a high-performance car that will have a cost of a quarter-million. Really?

Who will buy this car at such a lofty price from a company that still has only plans to produce it? No track record, not any tests, not any reliability grade by other prestigious companies.

Just look at the fundamentals. Operating income is getting more negative, net losses widen and a cash burn problem is obvious.

The Bottom Line

If I had to give kudos to Mullen Automotive, it would be for the very smart decision not to invest money in a new manufacturing building but to buy an existing one at a very affordable cost. This is a great business decision.

The bad news is that by the year 2024 too many other electric models will have flooded the market from other established makers. And we may also see the next generation of batteries, the ones that will charge faster and have a much better driving range.

Finally, it is possible for Reddit to hit again if there is a short squeeze. What feels impossible is for MULN stock to rally further, as the production is two years away. Come on! It is time to get serious. When will the announcement of a stock offering come? I would bet it could be anytime soon. Not to forget the fact that Mullen Automotive has a negative total equity of -$10.49 million as of Dec. 31, 2021, which is a red flag to be aware of now.

I could be an analyst covering exclusively the automotive industry as I love cars. Sadly I do not see any love for MULN stock now, based on its financials.

On the date of publication, Stavros Georgiadis, CFA  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 InvestorPlace.com Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.


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