Mullen Automotive (NASDAQ: MULN) stock price jumped by more than 8% on Monday after the company made huge battery news. The shares soared to a high of $0.2160, which was a few points above the year-to-date low of $0.1900.
Mullen Automotive solid-state battery newsMullen Automotive is a company in the highly-embattled electric vehicle (EV) industry. The company is building vehicles that it hopes will compete with existing products by companies like Tesla, Rivian, General Motors, and Ford.
Mullen Automotive has made several headlines in the past few months. For example, last week, the firm received an EPA certification for its Class 1 EV cargo vans. A day earlier, the firm amended its filing, downgrading its deliveries for the fourth quarter.
Mullen now believes that it will only produce 150 vehicles instead of the previous estimate by the CEO of 450. A closer listen to the transcript shows that he likely said 150. Also, the firm expects to sell 300 sales of Mullen One this quarter.
The most recent news came on Monday when the company said it was expanding its American battery production to take advantage of the Inflation Reduction Act (ARA). it will do that by consolidating its battery plant in Monrovia with the recently acquired Romeo Power.
Mullen will start calibration of the solid-state polymer battery, which will be integrated into the Class 1 EV cargo van. It hopes that it will start the drivable test of this product in the first quarter of 2024. David Muchery, the CEO said:
“We are one step closer to fulfilling our commitment to providing the next-generation of battery technology to our lineup of EV vehicles, providing a clean and safe alternative to current lithium-ion batteries.”
Mullen’s balance sheetThe challenge for Mullen Automotive is that the current state of the balance sheet means that it will need to raise additional capital in 2024. According to WeBull, the company has $214 million in cash and short-term investments.
While this is a good number, Mullen is also burning millions of dollars. In the most recent quarter, the company’s net loss stood at over $311 million. As we have seen with other EV companies like Rivian and Lucid, cash burn tend to continue after the company starts vehicle deliveries.
Therefore, there is still a risk that Mullen will have a cash call in 2024, leading to more dilution. As shown in the chart below, the company’s outstanding shares have jumped to over 86.7 million, up from last year’s low of 1.288 million.
Remember, Mullen is also implementing a $25 million share buyback. I believe that a share repurchase scheme at this stage is not ideal because the company does not have any free cash flow.
Mullen is also facing other external challenges now that the EV sector is slowing. Companies like Tesla and Ford have been forced to slash prices in a bid to boost their market share.
MULN stock price forecast
Turning to the daily chart, we see that the Mullen Automotive stock price has a close similarity to T2 Biosystems, which I covered here. The shares have moved in a horizontal direction recently. As a result, the volatility has died down while the bearish volume has been higher than the bullish one.
Therefore, at this stage, I believe that it makes sense to avoid the stock because of the regular short squeezes. Besides, the company has a short interest of 12%.
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