The more speculative EV stocks have performed poorly this year, but Mullen Automotive (NASDAQ:MULN) stock is one of the worst performing of them all. Adjusting for its two massive reverse stock splits over the past ten months, shares have declined by over 99.6%. That right, a near-total wipeout for anyone unfortunate to be holding this once-hot EV play at the start of 2023.
Even after such horrendous destruction of capital, don’t assume there’s limited downside risk. There’s nothing that says a stock that has declined by 99.6% can’t decline again by another 99.6%, and this may just very well happen to MULN. With this in mind, read on, as I go through the latest with this company, and why shares remain on a crash course towards zero.
What’s Happening With MULN Stock
Mullen Automotive is far from the only fledgling EV maker to tap into dilutive financing to keep the lights on/fund its development, but Mullen has relied on this funding source much more heavily than even other cash-burning EV companies like Lucid Group (NASDAQ:LCID).
As a result of selling/issuing new shares of common stock or debt convertible into common stock, the split-adjusted share count for MULN increased 80-fold between June 30, 2022 and June 30, 2023, from 2.3 million to 184.2 million. At the same time, Mullen has poorly utilized the cash raised from these stock/convertible debt sales.
Burning through much of it to sustain operating losses, Mullen has barely made progress in its efforts to bring commercial and passenger EVs to market. With the overall value of the company as an enterprise falling, at the same time the number of shares has multiplied, it’s not a mystery why a $10,000 investment in this stock last January is worth just $40 today.
Again, don’t assume that the situation can only improve from here. The EV startup continues making destructive moves, all while its shares face a delisting from the Nasdaq exchange.
More Reverse-Splits, More Losses
On Oct. 19, the company announced that it is putting a proposal to reverse-split MULN stock (on a 1-for-2 to a 1-for-100 basis) up for a shareholder vote scheduled to occur on Dec. 15. Reverse-splitting will enable MULN to avoid a Nasdaq delisting, but don’t assume this will provide a boost for shares.
In fact, reverse-splitting back to a higher price could make shares more easily shortable again. Short interest with Mullen is already high as it is, according to Fintel (28.6% of outstanding float). That’s not all. There is also a strong chance the company will engage in additional shareholder dilution.
As Investing.com reported on Oct. 24, Mullen continues to charge ahead, on both its efforts to ramp up commercial EV production/sales, as well as its efforts to bring a passenger EV (the Mullen FIVE) to market.Back in June, Mullen reported having $235 million in cash on hand.
Given the high upfront costs of building out EV production infrastructure, chances are this will not be enough to sustain itself until it hits the self-funding stage. Additional capital raises are likely. Alongside a reverse-split, this could drive more losses for MULN investors.
If the aforementioned reverse-split/dilution scenario sounds bleak, keep in mind that is the “best case scenario” for Mullen. Without a reverse-split, MULN will move down to the over-the-counter market. This will reduce access to the stock by retail investors, pushing it to lower prices.
To keep on charging ahead, the company needs to continue diluting shareholders to raise the necessary growth capital, but what happens if it can’t even attract new capital?
As Morgan Stanley’s Adam Jonas has argued, a recent event with another fledgling company in the EV space suggests outside capital for this industry is drying up. Barring additional infusions of cash, Mullen is likely to experience the same fate as Lordstown Motors (OTCMKTS:RIDEQ), another EV flameout.
Likely to keep cratering towards zero, there’s much else to say about MULN stock, except “stay away.”
MULN stock earns an F 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.