Betting a few dollars on an exciting startup like electric vehicle (EV) manufacturer Mullen Automotive (NASDAQ:MULN) might seem harmless. Yet, I encourage you to find another investment than MULN stock. In all likelihood, Mullen Automotive will continue to disappoint its shareholders. Besides, the last thing you need in your account is a capital loss.
Don’t get the wrong idea. I’m not rooting for Mullen Automotive to fail, and the company actually disclosed some good news recently. However, the negative outweighs the positive, and Mullen Automotive simply isn’t the right business to risk your investable capital in.
What’s the Good News About Mullen Automotive?
To be fair and balanced, I must acknowledge that Mullen Automotive is making some operations progress. This shouldn’t convince you to ignore Mullen’s deep earnings losses, but it’s important to look at both sides of the bull-bear debate.
Here’s the scoop. First, the Environmental Protection Agency (EPA) granted Mullen Automotive Certificate of Conformity for the automaker’s Class 1 electric cargo vans. The company described this as a “key milestone for selling” these “vehicles in the U.S.”
Second, Mullen Automotive announced a new facility in California for producing EV battery packs. In the same press release, Mullen stated that it December 2023, Mullen will commence “drivable testing” of its new battery packs in the company’s Class 1 EV cargo van during 2024’s first quarter.
MULN Stock Reverse Split and Delisting Threat Are Serious Issues
Before you jump for joy at these operational updates, be sure to get the full story about what’s going on with Mullen Automotive. Then, you’ll probably choose not to invest in Mullen at all.
As you may be aware, Mullen Automotive has already enacted multiple reverse stock splits. Now, the company is proposing another reverse split.
This is expressed in Mullen Automotive’s proxy statement detailing the company’s upcoming special stockholders’ meeting on Dec. 15. Evidently, Mullen is proposing a reverse stock split with a ratio between 1-for-2 and 1-for-100.
Why would the company want to do this? Clearly, it’s because Mullen Automotive faces a Nasdaq exchange delisting threat. To regain compliance with the Nasdaq exchange’s listing requirements, Mullen has until Jan. 22, 2024, to maintain a “closing bid price of $1 per share for 20 consecutive trading sessions.”
Priced at around 20 cents in mid-November, MULN stock continues to trade far below the $1 minimum bid price that the Nasdaq exchange requires. Mathematically, the stock would have to gain hundreds of percentage points to get anywhere near $1.
You Can Do Better Than MULN Stock
Mullen Automotive’s latest proposal of a reverse share split reeks of desperation. Even if the company manages to avert Nasdaq exchange delisting, Mullen will still be a highly speculative, zero-revenue startup in a fiercely competitive industry.
In other words, don’t get overexcited about Mullen Automotive’s positive operational updates. Instead, conduct your due diligence on companies with better profitability prospects and refrain from exposing your portfolio to toxic MULN stock.
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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.