Electric vehicle manufacturer Mullen Automotive (NASDAQ:MULN) is forming a joint venture with two small companies in the EV space. That’s great news for Mullen Automotive and its stakeholders, right? Don’t jump to any conclusions. The bear case is still too strong to consider MULN stock now.
Previously, we explained why Mullen Automotive’s lawsuit involving an online tech publication could be problematic for Mullen. The lawsuit “may bring increased attention to the many issues/risks currently at hand.”
We could also point out that Mullen Automotive is unprofitable and has an enormous debt load ($98.73 million in total debt as of Dec. 31, 2022). Still, to be fair and balanced, we’ll be glad to take a closer look at the allegedly good news that Mullen recently shared.
| MULN | Mullen Automotive | $0.10 |
New Partnerships Probably Won’t Help MULN Stock
Mullen Automotive proudly announced that it’s partnering with Global EV Technology, Inc. and EV Technologies, LLC. (collectively known as “EVT”). Thus, the company formed a joint venture called Mullen Advanced Energy Operations, LLC. Under the terms of the agreement, Mullen Automotive owns 51% of this new entity.
At first glance, this might sound like great news. Mullen clearly wants to spin the collaboration as a positive development. Yet, MULN stock declined on the day of the announcement. Then, the shares continued to lose value over the next few days.
Undoubtedly, the following statement left a bad taste in people’s mouths. According to Mullen Automotive, Global EV Technology Inc. founder and Chief Scientific Officer Lawrence Hardge “was convicted of a state crime, which was ultimately expunged.” Also, there’s the vagueness of the press release. How much will Mullen Automotive have to pay to fund this new entity?
Mullen Automotive merely stated that it “will provide capital, execution and commercialization to grow the business.” Until more details emerge, it will be difficult to gauge whether Mullen will actually get a decent return on investment (ROI) from this joint venture.
Mullen Automotive’s Share Resale Raises Dilution Concerns
Adding to the bear case, Mullen Automotive recently filed to resell up to 2.11 billion shares of the company’s common stock. As Eddie Pan explained, this “spells further dilution for shareholders.”
According to Pan’s calculations, Mullen’s share resale, if completed in its entirety, “would mean that there would be 5.9 billion shares of MULN outstanding.” The last thing that Mullen Automotive’s current shareholders need is for the company to greatly increase the pool of outstanding shares, as this would likely lower the value of Mullen’s existing shares.
Speaking of Mullen Automotive’s shares, they’re still worth far less than $1 apiece. Last year, the Nasdaq exchange issued a noncompliance warning to Mullen Automotive. This occurred because the company’s stock had closed below $1 for 30 consecutive business days. So, now Mullen’s investors have to worry about both dilution and delisting risks.
What You Can Do Now
Mullen Automotive’s press release about the company’s new joint venture is full of enticing verbiage. However, it didn’t impress investors. The press release lacks important financial details, and that’s a bad sign.
Furthermore, Mullen Automotive’s investors should be concerned about the company potentially diluting the value of the Mullen’s existing shares. All in all, Mullen Automotive has too many problems and the bear case is overwhelming when it comes to MULN stock.
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.
