MULN stock: Mullen’s collapse from $725 million to near zero

Mullen Automotive (NASDAQ: MULN) stock price continued its strong sell-off this week, becoming one of the worst-performing electric vehicle companies in Wall Street. It has plunged by over 73% this year and by more than 99% in the past 12 months. Only Fisker, which was delisted by the NYSE has performed worse. 

Mullen Automotive, a budding electric vehicle company, has had a dramatic fall from grace as its market valuation has plummeted from over $725 million to just $24 million. In this period, investors who allocated funds in the company have seen their investments wiped out. 

A few stakeholders have made money even as investors have lost all their money. First, the company’s insiders have been compensated well. In 2022, the company was sued by a group of shareholders after it allocated $216 million to its CEO, David Michery. 

Electric Last Mile Solutions (ELMS) and Bollinger Motors also benefited as Mullen Automotive acquired them in 2022. Other than that, it is hard to see anyone who has made money in the company.

Mullen Automotive’s downfall has happened because of its substantial cash burn and the ongoing woes in the electric vehicle industry.

Its financial results showed that the company made just $366k in revenues in 2023 as it started delivering its trucks to Randy Marion Automotive. Randy has made purchase orders worth over $263 million.

However, I believe that Randy’s orders should be taken with a grain of salt since it is a motor dealer and not the end user of the vehicles. Since the orders are not fixed, the company, I believe, has a right to cancel them if customers are not buying them.

Mullen Automotive is still losing a lot of money. Its net loss in 2023 stood at over $1 billion, a big increase from the previous year’s $740 million. These losses should continue in the coming years, even assuming that Randy will continue buying the trucks.

Mullen has few options to raise cash since data shows that it ended last quarter with just $83 million in cash and equivalents. Equity raise is almost impossible considering that it has a market cap of just $24 million.

Debt financing in the era of high-interest rates will not be easy. Unlike in January, investors are now predicting that the Fed will not cut interest rates this year because of the elevated inflation. 

Mullen Automotive is not the only EV company that is struggling. Tesla, the biggest automaker in the world, is laying off 10% of its employees. Similarly, companies like GM and Ford have all slashed their investments on EV.

MULN chart by TradingView

Therefore, with Mullen, we have an EV company building trucks in an unproven market. It is a cash-burning company that is also seeing waned interest from retail traders. Data by Yahoo Finance shows that the daily volume has averaged less than 500k shares per day in the past few months.

Looking at the daily chart, we see that the MULN share price has been in a strong bearish trend for a long time. It has moved to a split-adjusted all-time low of $3.50. Consequently, it has remained below all moving averages while oscillators have continued falling.

Therefore, as I have warned before, I believe that the path of the least resistance for the stock is downwards. My target for the stock is zero, as it faces unsurmountable challenges in the long term.

The post MULN stock: Mullen's collapse from $725 million to near zero appeared first on Invezz