Mullen Automotive (MULN) stock has been one of the worst performers this year as it crashed by 99.85%. It has also fallen by almost 100% in the past few years, bringing its market cap to over $3.4 million.
Mullen Automotive is struggling
Mullen Automotive is an American electric vehicle company that aims to challenge the likes of Tesla and Rivian.
The company went public in 2021 as demand for EVs and other clean energy stocks jumped. At its peak, its market cap peaked at over $700 million.
At its peak, MULN executed several acquisitions. It acquired Electric Last Mile Solutions (ELMS) and Bollinger Motors in 2022. ELMS’s helped it gain a plant in Indiana, which is capable of producing 50,000 vehicles a year.
Bollinger Motors, on the other hand, gave it access to a company building electric trucks and SUV vehicles. It spent over $240 million buying ELMS and $148 million acquiring Bollinger Motors.
Today, the company is cash-strapped, with less than $3.6 million in cash and short-term investments.
MULN forecasts strong revenue growth
Mullen Automotive stock price was in the spotlight after the company predicted that its revenue growth is continuing.
It expects that its second-quarter revenue will be $4.5 million, higher than the $65,235 it made in the previous quarter.
These revenue numbers are because the company has started delivering its vehicles to wholesale clients in the US.
The report also said that its monthly cash burn stood at $12.8 million in the second quarter, lower than the previous $18.1 million. It expects to achieve breakeven levels in terms of cash burn in the fourth quarter of 2025.
As part of its cost-reduction strategy, the company is slashing about 20% of its workers and eliminating its passenger EV business. This strategy will see it focus its business on commercial vehicles.
Mullen has also made more announcements. For example, it now counts Pape Group as a client. Pape is a leading dealer with over 150 locations in the United States. It also has over 815 service bays and 1,500 technicians.
In addition to Pape, the company’s products are offered by Randy Marion Group, which has placed hundreds of orders.
Red flags are all over
The challenge for the Mullen Automotive stock price is that it has numerous red flags that will affect its performance in the future.
First, the company is still burning cash in the tune of over $12.1 million. These cash burns are normal for companies in the EV industry. Indeed, Tesla burnt billions of dollars before it became profitable.
Rivian and Lucid Group have also continued burning cash many years after they started their vehicle deliveries.
The difference, however, is that these companies have access to capital. Rivian recently received $5 billion from Volkswagen Group, while Lucid is backed by Saudi Arabia.
Mullen does not have the funds it needs before it starts to generate positive cash flows in 2025. It ended the last quarter with less than $5 million in cash in its balance sheet.
The cash balance has increased since then, with it receiving $11.9 million from investors. It will then an additional $600k from the same investors. Also, it has an investment commitment of $150 million through an equity line, which allows it to offer common stock. The challenge, however, is that its stock has become almost worthless, meaning that the $150 million funds may not materialise.
The other red flag is how Mullen reports its numbers. The most recent results showed that its nine-month net loss came in at $326 million, a big improvement from the $806 million it lost in the same period last year.
It invoiced 377 vehicles valued at $16.8 million. However, the company decided to defer the revenue and accounts receivable until invoices are paid. This is a red flag because nine months are too many for a company not to have received payments for trucks it has sold.
The main issue is that many dealers have been complaining about the slow growth of their EV business. Just recently, Stellantis dealers sent a letter to the CEO claiming that customers were no longer buying EVs.
Mullen Automotive stock analysis
MULN chart by TradingView
The daily chart shows that the MULN stock price has moved sideways in the past few months. The Average True Range (ATR) has continued falling, meaning that the stock has had no volatility. It also remains below the 50-day and 100-day moving averages.
Therefore, the stock will likely continue falling in the near term as bankruptcy risks remain. If this happens, I suspect that it will drop below the key support level at $1 in the coming months.
The risk for shorting Mullen Automotive is that it is expensive to borrow shares for now. Also, it has a high short interest of 32%, meaning that it could have a short squeeze.
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