Mullen Automotive (NASDAQ:MULN) stock is once again making headlines, but these latest developments aren’t being met with much excitement based on recent price action.
In the past few weeks, this early-stage electric vehicle manufacturer has hit a major milestone. The company has closed on a large financing deal. Shares have barely budged on this news.
However, if you believe that ignoring this news is a mistake on the market’s part, think again. These headlines may sound impressive on the surface. They may also signal more progress for this company in the months ahead.
Yet when it comes to what these news items mean for MULN investors, it’s a different story entirely. It changes little with a situation that has already led to big losses for investors. At worst, it may point to another big round of losses ahead.
| MULN | Mullen Automotive | $0.11 |
What’s (Not) Happening With MULN Stock
Mullen is pursuing multiple opportunities in the EV space, but it’s been in commercial vehicles that the company has made the greatest progress. On March 31, Mullen announced it made the first deliveries of its Class 1 EV cargo vans.
Ahead of this delivery news, there was growing skepticism about the company hitting this milestone. Mullen CEO David Michery even had to release a statement to assuage this and other concerns. However, despite hitting Michery’s “deadline” (end of March), MULN stock only temporarily spiked on this news, coughing back gains within days.
Not too long after this, Mullen announced big news again, on April 6. In an 8-K filing with the Securities and Exchange Commission on that day, the company disclosed that it has secured $110 million in additional financing, via the sale of convertible preferred stock, warrants, and promissory notes to a group of institutional investors.
Again, much like the deliveries announcement, this development has failed to spark much enthusiasm, with up by just a penny since this filing. Mullen as a company may be making big moves, yet the same can’t be said about the stock.
More Trouble Ahead for Shares
Like I mentioned above, both of these developments may initially sound like positives for MULN stock. However, while reaching the deliveries stage with electric cargo vans is a bona fide sign of progress, don’t assume this will translate into materially better results for the company.
Why? Given what we’ve seen with other EV upstarts, it is doubtful Mullen will hit profitability with its commercial EV offerings, this early into the commercialization stage. Mullen, already burning through cash during the pre-revenue stage, could see its cash burn accelerate in the coming quarters.
This ties into the recent financing news. It is impressive that Mullen, largely abandoned by the market, has secured another nine-figure amount of fundraising. Then again, maybe not.
The company is paying a pretty penny for these additional funds. Mullen’s promissory notes come with a steep interest rate (15%), and if converted, the preferred stock will undoubtedly lead to a fresh round of shareholder dilution.
Worse yet, chances are this last capital raise will not be the last one. Based on its past operating performance, Mullen will probably burn through this cash within months, requiring further capital raises. This will keep MULN spiraling down towards even lower prices.
The Best Move Here
Mullen Automotive has already been left for scrap in the stock market junkyard. Yet while its low stock price may imply that shares have little room to fall from here, unfortunately, that’s not the case.
Back during the height of the “meme stock” era, exciting headlines may have been enough to re-spark investor enthusiasm, but that’s far from the case today. Investors large and small have wised up, with a keen eye on the fundamentals.
Multiple rounds of heavy dilution are why the stock has tumbled from around $2.50 to just over a dime per share in less than twelve months. Further rounds of dilution, without rapid improvements in Mullen’s fiscal performance, could fuel a similarly sized price decline.
With the latest news more negative than positive for MULN stock, avoid at all costs.
MULN stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
