Emerging electric vehicle (EV) manufacturer Mullen Automotive (NASDAQ:MULN) continues to march forward despite myriad challenges. On Monday, the company announced a key commercial EV milestone with its all-electric Class 3 low cab forward chassis truck. Despite the positive broader implications of the news, MULN stock slipped 6% Tuesday afternoon, reflecting the ongoing disconnect between Mullen’s efforts and its market valuation.
According to the company’s press release, the EV manufacturer received certification from the California Air Resources Board for its Mullen Three truck. Per the statement, “[t]he certification is awarded to vehicle manufacturers who meet specific emissions standards in compliance with CARB regulations.” Further, the District of Columbia and 14 states — including California — have adopted vehicle standards above Environmental Protection Agency (EPA) standards.
With the news, Mullen’s Class 1 and Class 3 commercial vehicles now possess both EPA and CARB certifications. As well, both vehicles fully comply with U.S. Federal Motor Vehicle Safety Standards. Primarily, the key catalyst of this development is that the company can now sell the Mullen One and Three in every state of the nation.
Moreover, Mullen is eyeballing certain regulatory developments. In particular, CARB’s Advanced Clean Fleets (ACF) Regulation calls for a phasing in of zero-emission vehicles (ZEVs) and a requirement that manufacturers only produce ZEV trucks starting in the 2036 model year.
MULN Stock Faces Ugly Prospects in the Market
To be sure, Mullen has exercised commendable efforts to stay afloat. Encouragingly on one level, company CEO and President David Michery represented the most recent insider buying transaction on Aug. 16 of last year, picking up 1,020 shares. It also happened to be the only insider buy of 2023.
Still, the problem remains that even with support from both the retail investment community and the CEO, MULN stock continues to frustrate the bulls. For example, investment data aggregator Gurufocus notes that since Michery’s aforementioned purchase, Mullen shares have lost more than 92% of equity value. At some point, even the most determined bulls may be tempted to exit.
Ironically, though, it’s this very commitment to hold on for dear life (HODL) that could be stymieing upside potential for MULN stock. As data from Fintel shows, MULN’s short interest as a percentage of float stands at 20.42%. Generally, the short interest of float above 20% is extremely high. However, the issue is that the short interest ratio is low, with only 1.17 days to cover.
Put another way, the bears would only need just over one trading session to cover or unwind their exposure based on average trading volume. So, the question is, what would cause MULN stock to run a high short interest but a low short interest ratio?
Likely, the answer centers on the exceptionally high short borrow fee of 93.87%. With retail investors committed to HODL-ing, fewer shares are available to short. Thus, the cost to short MULN stock may outweigh the perceived benefits for prospective bears.
Why It Matters
To use a baseball analogy, a high short interest as a percentage of float is similar to a pitcher falling behind in the count. However, a low short interest ratio is akin to having no runners on base. While there’s pressure on the pitcher to perform, the consequence of throwing a wild pitch is just not as steep as it would be if there were runners in scoring position (high short interest ratio).
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On the date of publication, Josh Enomoto 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.
