In 2021, I finally downgraded my “buy” rating on Tesla (NASDAQ:TSLA) stock for a 180% gain. The electric vehicle firm had just joined the S&P 500, and I felt that its $900 pre-split price left room for little upside. CEO Elon Musk was also turning his attention away from the maturing EV firm to focus on newer projects.

As Mr. Musk steps back from the EV world, a new contender for his startup crown is emerging: Mullen Automotive’s (NASDAQ:MULN) David Michery.

Like Elon Musk, the charismatic founder of Mullen has gained almost cult-like status among his supporters. Minor appearances in online interviews can fuel days of speculative buying. And each new capital raise seems to be met with plenty of retail demand.

As Mullen’s cash burn continues, however, investors are rightly beginning to wonder whether Mr. Michery is indeed the next Elon Musk…

…or the next Steve Burns of Lordstown Motors (NASDAQ:RIDE).

The Titans of Industry

American startups have long relied on the “great man theory.” Venture capitalist Paul Graham famously recruited the founders of Airbnb (NASDAQ:ABNB) for their determination, rather than their business idea. Large studies have also found that financiers are more likely to fund people they know.

These forces mean that America’s largest electric vehicle startups are largely run by charismatic CEOs who excel at fundraising. Car factories can cost billions to build and new car models take years to launch. Only automakers with superstar CEOs from Mullen’s David Michery to Lucid Motor’s (NASDAQ:LCID) Peter Rawlinson have any chance at charming their way into investor pockets.

The result can be effective. Last Wednesday, Tesla reported $3.33 billion in net income. $10,000 invested in Tesla’s stock during its 2010 IPO would be worth almost $1.7 million today. And Lucid remains one of the few SPAC mergers of its vintage to remain above $10.

But the same reliance on strong-willed individuals also comes with corporate governance risks. In 2018, Elon Musk pushed through a $50 billion pay package despite opposition from shareholders and two proxy watchdog firms. Tesla’s arcane supermajority voting rules mean that a minimum of 89.5% of outside shares must agree to overturn decisions on board compensation and other major decisions.

Opaque governance also makes it easier to engineer outright frauds, as Nikola (NASDAQ:NKLA) shareholders found after a short seller report surfaced in 2020. A federal jury would eventually find former CEO Trevor Milton guilty of defrauding investors by lying about his company’s achievements — including in one notable video where an engineless truck was rolled down a hill to mimic a working prototype.

A CEO’s fundraising ability also has little to do with their knack for producing cars. In June 2021, Lordstown Motors CEO Steve Burns resigned following allegations that he and other executives had inflated preorder figures for his company’s electric pickup truck. For many of these promotional CEOs, it’s far easier to manufacture growth through marketing or acquisitions than it is to build a vehicle from scratch.

A Bumpy Ride for MULN Stock

Nowhere are these risks clearer than at Mullen Automotive, a $280 million firm with promises to build an end-to-end electric vehicle company.

In many ways, it looks like an early version of Tesla. In 2012, CEO David Michery bought assets of CODA Automotive and Mullen Motor Cars as a bet on green transportation technologies. The firm would acquire auto dealership CarHub.com six years later to push into direct retail. The California-based company has also pursued headline-grabbing ideas from extracting drinking water from the air in its cars to cramming 1,000 horsepower into its EV sport crossover, creating a steady buzz that has helped Mr. Michery to raise $132 million in debt and equity since mid-2021.

But Mullen lacks even the basic protections of Tesla’s corporate structure. Tight insider control and generous self-dealing at Mullen mean that CEO David Michery now owns around 45.5% of the company’s voting shares once warrants and preferred shares are counted. This comes despite years of diluting other shareholders; outstanding shares have increased 900% in the past year alone.

Mullen’s board is also woefully inadequate for a firm that was once worth almost $1 billion. Its Class I directors include Ignacio Novoa — a former police officer and an alleged serial lawsuit filer — as well as Mary Winter, a 31-year-old with no stated work experience beyond her seven-year tenure at Mullen. The electric vehicle’s independent directors include Mullen’s former CFO and two real estate investors with no experience in managing public companies.

These are all signs of a “captured” board — a de-fanged watchdog with little ability to push back against management decisions. Mr. Michery’s alleged $216 million pay package is one of the most generous of any in corporate America and could give him near-majority control over the electric vehicle company. Executive-level decisions this year to acquire Bollinger’s commercial truck business also run counter to the firm’s original vision of making electric vehicles to “fit perfectly into the American consumer’s life…” unless you can picture commuting to work in a 7-ton truck.

Weak governance runs rampant at many electric vehicle firms. Lordstown’s Steve Burns had a long history of pursuing pet projects, including an electric quad-copter panned as “non-core” by shareholders. And outsized pay packages extend beyond Tesla and Mullen’s walls; Nikola’s Trevor Milton and Mark Russell both received $159 million paydays in 2020 before Milton’s fraud became public. When passive boards meet headstrong CEOs, outside investors are often the ones to lose.

Should You Buy Mullen Stock?

Mullen Automotive could still become a behemoth in electric vehicles.

In August, California approved an executive order to ban all new gas-powered vehicle sales by 2035, a move that will trigger similar restrictions in other states. Analysts at consultancy BCG now estimate that worldwide battery-powered EVs will amount to 59% of all car sales by 2035, suggesting a growth rate so rapid that severe quality issues will continue getting swept under the rug with little consequence. Much like e-commerce companies in 1999 or social media firms in 2012, the electric vehicle space in 2022 is still anyone’s to win.

Mullen’s newly acquired manufacturing facilities from its Electric Last Mile (OTCMKTS:ELMSQ) and Bollinger acquisitions also give it a leg up in commercial vans and trucks — two markets with historically better margins and more forgiving customers. Trucking fleet operators will often pay higher prices upfront to guarantee standardization in spare parts and service, a fact that powers above-average return on capital invested at truck makers like PACCAR (NASDAQ:PCAR). A steady stream of headline-grabbing news has also helped the firm remain top of mind.

But even if Mullen “makes” it, its CEO’s similarities with the leaders of Tesla and Lordstown Motors paint a harsh picture for long-run shareholders. Mr. Michery’s willingness to dilute external shareholders while boosting his personal stake points to a leader more interested in helping insiders succeed than in enriching external shareholders. And his firm’s cash burn rate suggests that existing shareholders will face 32% dilution per year at current prices, or as much as 70% dilution if prices fall back to the 20-cent range. Even if Elon Musk’s contender succeeds in turning Mullen into a profitable firm, existing shareholders will find themselves owning a vanishingly small sliver.

On the date of publication, Tom Yeung 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.