While electric vehicles (EVs) are witnessing increased adoption amid growing environmental concerns and favorable policies, many startups in the EV space have lost substantial value and are trading as penny stocks, eroding shareholder value. Supply chain issues and funding shortages to support production took a toll on these companies. Let’s focus on two EV startups that eroded shareholders’ wealth in 2022.
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Mullen Automotive (NASDAQ:MULN)
Shares of emerging EV maker Mullen Automotive are down over 96% year-to-date. Supply shortages, concerns around access to capital, equity dilution, and competitive headwinds dragged MULN stock down.
As MULN stock is close to its 52-week low, it appears incredibly cheap and can be a solid speculative bet for investors with a higher appetite for risk. The company has lowered its overall indebtedness, secured exclusive rights to sell I-GO in select European markets, and is focusing on ramping up production. Also, BlackRock (NYSE:BLK) increased its holdings in MULN stock.
However, insiders sold MULN stock worth $196.1K last quarter. Moreover, MULN stock scores one on TipRanks’ Smart Score system, implying a weak outlook.
Lordstown Motors (NASDAQ:RIDE)
Lordstown Motors’ stock recovered from its lows and has gained 25% in the last five trading days as the company started the delivery of its first customer vehicles. Further, RIDE stock is up about 6.63% in the pre-market session on December 1.
Despite the recent recovery, RIDE stock is still down about 52% year-to-date. Further, it is down about 64% from the 52-week high. Challenges, including a shortage of funds to support production and the supply chain, weighed on Lordstown Motors’ stock. Additionally, insiders selling RIDE stock (sold RIDE stock worth $16.3M last quarter) continued to be a drag.
While the start of customer deliveries is a positive development, concerns related to additional funding and further shareholder dilution could limit the recovery.
Lordstown Motors stock has an Underperform Smart Score of two on TipRanks’ Smart Scoring system.
Bottom Line
Though MULN and RIDE operate in the attractive EV space, both of these companies are in the early stages of development, implying their stocks will be highly volatile. Moreover, their need for additional capital and fear of equity dilution could restrict the recovery.
