Cost to Borrow Mullen (MULN) Stock Falls 80% Overnight

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  • Mullen Automotive’s (MULN) cost to borrow fee has sunk to 133.31%, which is still considered high.
  • The cost to borrow fee peaked at 742.53% on Jan. 3.
  • Shares of MULN stock closed higher by 4.3% today.
The Mullen Five vehicle is displayed at the 2021 LA Auto Show media day in Los Angeles, November, 18, 2021. MULN stock.
Source: Ringo Chiu / Shutterstock

Mullen Automotive (NASDAQ:MULN) stock has been at the center of attention following a significant rise in MULN’s cost to borrow (CTB) fee and a subsequent decline. On Dec. 23, MULN stock had a CTB fee of 8.55%. That figure rose to a staggering 742.53% on Jan. 3, marking an increase of more than 8,000%. At the time of this writing, the fee has declined to 133.31%, marking a drop of 82% compared to Jan. 3. Meanwhile, Fintel reports that there are currently 350,000 shares available to short.

As of Dec. 15, there were a total of 161 million shares sold short with a value of $50.59 million. That’s equivalent to a short interest as a percentage of float of 43.5%, which is considered high enough to drive a short squeeze.

Make no mistake, a CTB fee of 133.31% is still extremely high. According to Finance Train, the average stock carries a CTB fee of just 0.3%. So, what exactly does a falling cost to borrow fee signify?

MULN Stock: Cost to Borrow Fee Plunges 80%

A lower CTB fee signifies less short seller demand for a stock, while a higher CTB fee signifies greater short seller demand. When short shares are in high demand, lenders must charge a higher CTB fee and vice versa. S3 Partners analyst Ihor Dusaniwsky explains the following:

“An increase in stock borrow rates may force (squeeze) some short sellers into closing their positions — getting out to realize their remaining mark-to-market profits and exiting before other buy-to-covers drive the stock price up.”

That’s what may have happened. Following an increase in CTB fees, short sellers may have covered their positions to avoid the fee, heading for the exit as quickly as possible. Today, shares of MULN stock dipped lower by more than 5% but closed the day higher by 4.3%.

A high CTB fee paired with high short interest are key ingredients for a short squeeze. At the same time, shares of MULN have experienced heavy dilution in the past year, making a squeeze more difficult.

On top of that, a major catalyst for Mullen shareholders is just around the corner. Mullen had initially planned to hold its special meeting of stockholders on Dec. 23, but the meeting was adjourned to Jan. 19. On that day, shareholders will vote to approve several changes, such as a reverse stock split and an increase in authorized shares to 5 billion from 1.75 billion.

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On the date of publication, Eddie Pan 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.


Article printed from InvestorPlace Media, https://investorplace.com/2023/01/cost-to-borrow-mullen-muln-stock-falls-80-overnight/.

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