Apparently, electric vehicle (EV) manufacturer Mullen Automotive (NASDAQ:MULN) is expanding its business operations into a new area — again. The MULN stock bulls might celebrate this, but consider the big picture. All in all, the risk-to-reward balance still doesn’t favor Mullen Automotive and its investors.
I’ll admit, there may be a news item or two that seems to shed some positive light on Mullen Automotive. I’m still not ready to recommend an investment in Mullen, though. After all, there’s still a big threat that could spell disaster for Mullen Automotive’s loyal shareholders.
Some Good News for Mullen Automotive
To be fair and balanced, I’ll start off with the good news. First, after Mullen Automotive completed an electric cargo van pilot program for the New York Power Authority (NYPA), Mullen announced that the NYPA “will purchase the initial pilot vehicles for fleet operations.”
It would have been nice if Mullen Automotive’s press release had specified, or at least estimated, the number of cargo vans NYPA plans to purchase. Without that information, it’s difficult to assess the impact this will have on Mullen Automotive’s financials.
Next, the Internal Revenue Service (IRS) approved Mullen Automotive for a Qualified Manufacturer designation. This means Mullen can finally get commercial EV federal tax credits of up to $7,500 per vehicle.
That’s certainly positive news, but it may be too little, too late. Tesla (NASDAQ:TSLA) and other EV makers qualified for federal tax credits a long time ago. Besides, cost-conscious EV shoppers would probably consider Tesla’s more affordable vehicles before looking at Mullen’s EVs.
MULN Stock Could Get Booted Any Day Now
So, there you have a couple of positive news items for Mullen Automotive. However, they’re probably not enough to outweigh the big deal-breaker, which I’ll get to in a moment.
Before that, I should address something that might sound like good news, but I’m definitely skeptical. I’m referring to Mullen Automotive’s disclosure that it’s getting into the fleet telematics business.
Specifically, Mullen Automotive is launching Commercial Pulse, which is designed to offer “a complete solution for vehicle diagnostics and fleet optimization.” It’s a typical fleet telematics product that provides vehicle location services, maintenance and safety alerts, etc.
Between telematics solutions and battery-pack technology, it seems like Mullen Automotive is trying to expand its business operations in multiple directions at once. Yet, Mullen is still deeply income-negative as an EV manufacturer.
Perhaps Mullen Automotive ought to master its core competency before venturing into new, potentially costly business ventures. And in case that’s not enough to worry about, Mullen still faces a Nasdaq exchange delisting threat.
Mullen did file an appeal of the potential-delisting notice, but MULN stock continues to trade below the $1 minimum bid price that the Nasdaq exchange requires. Hence, Mullen Automotive could conceivably get kicked off of the exchange any day now.
MULN Stock Is Just Too Much Trouble
It would be a major downgrade if Mullen Automotive is relegated to an over-the-counter (OTC) exchange. Yet, even after some seemingly positive news items, the Mullen Automotive share price remains below the $1 threshold.
Someday, I might see the potential for Mullen Automotive to overcome its problems. A crucial step would be for Mullen to achieve profitability, but that’s a pipe dream at this point.
Above all else, investors should understand that the Nasdaq exchange’s delisting threat is real and quite serious. Therefore, I can’t recommend owning MULN stock now.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, David Moadel 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.