Shares of Mullen Automotive (NASDAQ:MULN) have been trending for weeks. That’s as investors anxiously await an update from the company on deliveries and production. It’s also as traders speculate about a potential short squeeze in MULN stock.
Meanwhile, several electric vehicle (EV) stocks have been struggling lately. Tesla (NASDAQ:TSLA) recently hit 52-week lows as investors juggle CEO Elon Musk’s takeover of Twitter. Lucid Motors (NASDAQ:LCID) continues to grind out new lows, while Rivian (NASDAQ:RIVN), Fisker (NYSE:FSR) and others continue to struggle.
Chinese EV stocks like Nio (NYSE:NIO) and Li Auto (NASDAQ:LI) have done well over the past few weeks. Overall, though, EV stocks have struggled this year.
As for MULN stock, it has been far from spectacular this year. Shares made a new 52-week low on Dec. 7 at 18 cents. Year to date, the stock is down more than 96%. That’s not typically a recipe for a winning stock pick.
Short Squeeze on Deck for MULN Stock?
When a stock is hated and the sellers are in control, it’s like sharks smelling blood in the water. Investors continue to pile in on the short side, looking to squeeze every drop of profit out of the stock as its share price falls.
The bulls’ misery is a playground for the bears.
However, there are times when the scale becomes so unbalanced, it causes what’s known as a short squeeze. Put simply, when too many traders are holding a short position in a certain security and the price of that security begins to rally significantly, it triggers a wave of buying. That happens as both natural buyers — the bulls — buy the stock and as shorts have to buy to cover their position.
Now some are starting to speculate that could happen in MULN stock.
MarketWatch data shows a short interest of 47%. However, other sites only suggest a short interest of 10% to 12%. That said, the Nasdaq shows about 175.5 million shares sold short as of Nov. 30. As of the most recently filed 10-Q, the company had about 376.7 million shares outstanding.
Regardless, it typically helps when there is a catalyst or event to help trigger a short squeeze. Could that be the company’s proposed reverse stock split? Maybe, but perhaps not likely. Further, the company has already closed on its deal for Electric Last Mile Solutions.
Remember that in October, MULN stock nearly tripled in just a couple of trading sessions. That came after news that it gained exclusive distribution rights to I-GO EV in Europe. Will similar price action happen again? Who knows, but it is possible under the right circumstances.
On the date of publication, Bret Kenwell 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.