This past week, Bed Bath & Beyond (NASDAQ:BBBY) finally filed for bankruptcy after months of speculation. The home furnishing retailer opted for the Chapter 11 route. While this is sometimes seen as a means of simple reorganization, it really seems like Bed Bath Beyond is done. Now, though, Mullen Automotive (NASDAQ:MULN) stock is coming further into focus as a result.
Bed Bath & Beyond has made clear that its plans to “implement an orderly wind down of its business” and shares have been falling ever since. Granted, BBBY stock didn’t have much room to run before. Still, declines today have pushed BBBY dangerously close to the 10 cent mark.
For some retail investors, this means having to find a new meme stock to focus on. And according to a Reddit thread, Mullen is a likely candidate for the next meme sensation. But that doesn’t mean this is the time to be doubling down on MULN stock.
MULN Stock Still Isn’t a Buy
After a volatile month, MULN stock is steadily declining as well, even after reporting several major achievements. For example, the company recently formed the Mullen Advanced Energy Operations (MAEO) joint venture and made significant progress on the electric vehicle (EV) battery front. Through it all, however, MULN has continued to race to the bottom. It has stayed relevant largely due to meme stock momentum — exactly the type of superficial hype that doesn’t generate actual sustainable growth.
Now that Bed Bath & Beyond is done, Mullen will likely see even more attention from the r/WallStreetBets crowd. In a community subreddit titled r/Muln, users have been touting their MULN stock bets. One user noted that they bought Mullen shares after “getting crushed in BBBY.”
That said, a recurring narrative across the subreddit is that investors are also getting crushed in Mullen. This is hardly surprising; MULN has fallen 85% over the past six months and more than 90% for the past 12 months. While it may be a tempting play for traders who embrace risk, there’s nothing to suggest the troubled meme stock will fare better in 2023 than Bed Bath did in the second half of 2022. In fact, Mullen may be headed for an eerily similar fate. InvestorPlace contributor Larry Ramer reports:
“Mullen’s CEO and institutional investors are showing an apparent lack of confidence in Mullen. This, combined with bare company coffers, suggests this is a company that isn’t on the right road. In fact, I’d argue that Mullen is probably headed for bankruptcy sooner or later.”
The Bottom Line
If Ramer is correct that Mullen is on the fast track to bankruptcy, Bed Bath & Beyond has given investors a good preview of what they can expect. Of course, there have been instances like the Revlon (OTCMKTS:REVRQ) squeeze last summer, when retail investors flagged the recently bankrupt company as a short squeeze target. However, since moving to trading on an over-the-counter (OTC) exchange, REVRQ has also struggled significantly.
BBBY isn’t likely to be lucky and neither is MULN stock. Investors should heed the warnings on the r/Muln thread and focus on companies with more stability. The trend of betting on companies on the verge of bankruptcy is just dangerous.
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On the date of publication, Samuel O’Brient 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.comPublishing Guidelines.
