With effectively no revenue and burning through nearly a third of a billion dollars just last quarter alone, Mullen Automotive (NASDAQ:MULN) is the poster child of an ultra-high-risk, speculative stock. The company has achieved no truly meaningful milestones or tangible results thus far, instead existing solely on the back of investor cash injections. Of course, occasional short squeezes induced by hype-driven retail traders have temporarily boosted its stock price. However, the company’s underlying financial fundamentals and operational results remain astoundingly weak.
MULN Stock: Yet Another Reverse Stock Split
Mullen recently proposed yet another reverse stock split, this time an astonishing 1-for-100, coming after already completing splits totaling 1-for-225 so far this year. Of course, this move clearly signals that Mullen is in a desperate downward spiral and grasping at straws to prop up its flailing stock price.
Naturally, reverse stock splits are typically last-ditch efforts for companies to artificially boost their stock prices and avoid a dreaded delisting from major exchanges. Mullen seems intent on continually doing split after split, inorganically inflating its stock price, while simultaneously diluting shareholders via the massive issuances of new shares. From my perspective, this vicious cycle of reverse splitting and diluting completely destroys shareholder value, and will eventually render the stock worthless over the long-term.
Why You Should Stay a Mile Away From MULN Stock
Ultimately, Mullen is a zero revenue, massively diluted penny stock desperately relying on reverse splits to maintain its NASDAQ listing and an illusion of legitimacy. From my perspective, it fits perfectly into the toxic category of stocks to avoid at all costs.
Of course, I see virtually no viable path forward for MULN stock to recover sustainably anytime in the foreseeable future. The massive headwinds of outrageous dilution coupled with massive cash burn make it nearly impossible for shareholders to come out ahead in this scenario. Naturally, shorting a stock like MULN is an exceptionally risky proposition that should be avoided by most investors. However, shorting just may be the only sensible way to play this imploding stock on its downward slide toward irrelevance.
Personally, I believe Mullen is a toxic option for long-term investors interested in generating real returns. With the company’s accelerating dilution and reverse splits, current shareholders will likely end up with mere pennies even in the unlikely event that MULN succeeds in producing and selling vehicles. Of course, pipe dreams of potential short squeezes pumping up the stock price temporarily simply provide false hope. I believe blindly betting on short-term pops in MULN stock while ignoring the glaring red flags is a recipe for losing everything.
Can You Still Win With MULN Stock?
Of course, some speculative investors will insist on playing Russian roulette with MULN regardless, lured in by fantasies of the meme stock mania of recent years repeating moving forward. Naturally, I believe throwing hard-earned money into a literal fire pit likely stands a better chance of leaving you with more leftover cash than investing in MULN at this point. The shareholder-unfriendly actions of management make it clear this is a stock focused on self-enrichment rather than creating value.
With its dilutive shenanigans, terrible financials, and lack of tangible progress on production, MULN stock simply has no place in a prudent investor’s portfolio, in my opinion. The company’s massive headwinds and flaws make it nearly impossible to justify investing in this company under any normal circumstances.
The Bottom Line
Of course, I cannot advise anyone to short a stock as fundamentally broken as MULN due to the irrational risks involved, but that might be the only way you can make money with MULN stock. However, longing for this imploding company without an ultra-speculative mindset seems utterly foolish. Personally, I plan to stay far away from MULN as the EV company continues to burn through cash and repeat its reverse split cycle. I urge other investors to avoid buying into false hype and joining this ride toward inevitable disaster as well.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Omor Ibne Ehsan 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.