No stranger to buzz generation, electric vehicle (EV) upstart Mullen Automotive (NASDAQ:MULN) gave investors something to chew on this morning. The company just bought a controlling stake in electric truck specialist Bollinger Motors. The market initially pushed MULN stock up by double digits on the news earlier today, although shares have since come down considerably.
According to MarketWatch, the purchase price for this deal is $148.2 million in cash and stock. In exchange, Mullen receives a 60% controlling interest, giving the firm “majority ownership” of Bollinger.
Founded in 2015, Bollinger got the hype train rolling early as a potential competitor to the Tesla (NASDAQ:TSLA) Cybertruck. When the new Tesla model was first introduced, critics called the EV ugly.
In contrast, the Bollinger B1 SUV evokes a mixture of classic and modern design elements a la the iconic Mercedes-Benz (OTCMKTS:DMLRY) G-Class. Theoretically, those strong motifs should help bolster MULN stock.
Fundamentally, Mullen’s acquisition now gives the company exposure to the commercial EV space. Bollinger specializes in medium-duty truck classes 3 through 6.
MULN Stock Meets a Wall of Skepticism
So, the new Bollinger acquisition looks good for Mullen, at least at first. CEO David Michery said the following about the news:
“This acquisition is one of the largest in the EV industry to date and provides Mullen with the unique opportunity to aggressively expand into the high-demand commercial EV space […] Combining Bollinger’s vehicles with our existing class 1 and class 2 EV cargo van programs gives us the chance to dominate the entire class 1-6 commercial light and medium duty truck segments.”
On paper, this news should be a massive boost for MULN stock. After all, EV makers have become increasingly focused not just on electrification, but also on delivering electric trucks and SUVs. Therefore, the commercialization of EVs represents an intuitive logical flow. But it’s not entirely clear that, in reality, demand for commercial EVs is as robust as it initially appears.
First, the industry currently faces an economic headwind. Back in early August, Yahoo! Finance reported that EV demand declined as gas prices dropped from their earlier peak.
Second, specific to the commercial EV industry, multiple challenges affect broader integration. In particular, the sector faces many infrastructural obstacles.
Finally, third — and specific to MULN stock — EV competitors continue to step up to the plate. For instance, while the Bollinger B1 does look like a G-Class, Mercedes-Benz will produce an actual electric G-Class soon. As such, some investors may be concerned that Mullen is biting off more than it can chew with the recent acquisition.
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On the date of publication, Josh Enomoto did not hold (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.
