Shares of Mullen Automotive (NASDAQ:MULN) stock are surging higher by over 25% on no immediate company-specific news.
Yesterday, the electric vehicle (EV) company disclosed new court-provided deadlines in its lawsuit against several broker-dealers for alleged market manipulation of MULN stock. Mullen now has until Nov. 30 to file an updated complaint, while the parties involved in the complaint have until Dec. 15 to jointly file their case management plan. Mullen did not provide any further details on why Judge Analisa Torres issued the amended complaint deadline.
This news alone does not seem to explain the jump in MULN today, especially given that MULN closed lower by about 10% yesterday following the news.
Why Is MULN Stock Up Today?
First, the jump could be attributed to an oversold bounce. From Sept. 25 to Oct. 23, MULN declined by about 60%. This decline was exasperated after Mullen proposed a reverse stock split in a ratio between 1-for-2 and 1-for-100 at its upcoming special meeting of stockholders. Shares of the company are trading well below the Nasdaq minimum bid price requirement of $1, and a reverse split could bring shares back into compliance. Mullen noted that it would only enact a reverse split if its shares could not reach $1 organically.
A short squeeze could also be the culprit behind today’s gains. As of Sept. 30, MULN carried a short interest as a percentage of float of 19.9%. That’s equivalent to 36.28 million shares being shorted with a value of $16.47 million. Generally, a short interest above 10% is considered high, while a short interest above 20% is considered very high. As a result, MULN had an increased chance of a short squeeze.
A stock’s cost-to-borrow (CTB) fee can also provide investors with hints about a possible short squeeze. The fee represents the annual amount that short sellers must pay to borrow stock. Furthermore, the fee rises when short seller demand is high and falls when it is low. MULN currently carries a CTB fee of about 10%, which is above the average CTB fee of between 0.3% and 3% but still not extremely elevated.
Finally, some investors on social media are speculating that Mullen has received another compliance extension from Nasdaq. This has not been confirmed by either Mullen or Nasdaq and should be treated as just speculation until either party makes an official announcement.
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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.
