As if entities that entered the public arena via a reverse merger with a special purpose acquisition company (SPAC) needed more bad news, short-selling specialist Hindenburg Research lashed out on its latest victim, electric vehicle (EV) manufacturing upstart Mullen Automotive (NASDAQ:MULN). Throughout most of the day, trading in MULN stock has been volatile, with shares in the red by about 2%.
While prospective investors of the speculative EV maker can read the litany of accusations that Hindenburg has leveled, perhaps the most egregious of the alleged offenses is that Mullen lied about its battery technology and performance metrics. Per Hindenburg, Mullen claimed that “its solid-state battery technology is on track for commercialization in 18 to 24 months, putting it ahead of every major technology and automaker in the industry who have collectively invested billions on solving the problem.”
Considering that automotive giant Toyota (NYSE:TM) and battery-tech specialist QuantumScape (NYSE:QS) have collectively invested massive funds toward developing the “holy grail” of EV battery platforms, the idea that the relatively unknown Mullen could beat the alpha dogs in the segment is unlikely.
Further, Hindenburg states that the EV upstart misrepresented the test results leading to the above claim about commercialization targets. Worrying for investors of MULN stock, the short seller claims that it spoke with the chief executive of the company conducting said tests. The chief executive officer told Hindenburg, “We never would have said that. We never did say it and certainly wouldn’t have said it based on the results of testing that battery.” If that wasn’t damning enough, Hindenburg claimed that Mullen is merely an EV hustle. Primarily, in 2020, Mullen “announced a joint venture to manufacture its sold-state battery technology.” However, Hindenburg spoke with a senior executive familiar with the joint venture, who then dropped a bombshell: the joint venture “didn’t exist at all.”
To be fair, investors will want to conduct their own due diligence on MULN stock before taking the guidance of Hindenburg or any party — especially if these entities have a financial interest in seeing shares go one way or the other. Still, the short-selling specialist does raise some objectively concerning points. As Hindenburg mentioned, the company only spent a little over $3 million in research and development (R&D) over the trailing 12 months. That seems awfully low considering that QuantumScape has spent $151.5 million on R&D during the same period and has yet to make such bold commercialization claims.
Against a broader scope, post-business combination SPACs have underperformed benchmark indices and EV-related investments have especially not fared well, with the downfall of Lordstown Motors (NASDAQ:RIDE) providing a cautionary tale. Whether you agree with Hindenburg or not, one conclusion is unassailable: you must investigate carefully before making a decision about MULN stock.
On the date of publication, Josh Enomoto 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.