I’d like to see Mullen Automotive (NASDAQ:MULN) succeed in the new year. Still, investors should plan for losses even if they’re hoping for gains. Mullen has some positive news to report, but overall, I am bearish on MULN stock and just can’t recommend it for 2024. Headquartered in California, Mullen Automotive is a relatively small electric vehicle (EV) manufacturer with a market cap slightly exceeding $40 million.
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Bottom fishers might take an interest in MULN stock because it’s trading far below its prior peak price. Yet, I feel that Mullen Automotive shares are “cheap for a reason” to borrow an old phrase. Indeed, Mullen has red flags that prospective investors can’t afford to ignore.
Mullen Automotive: Good News Trickles In, but It’s Not Compelling
Some companies deliver bombshell updates with game-changing facts and figures. In contrast, Mullen Automotive offers a trickle of positive news reports. The overall effect is pleasant but not particularly compelling.
I’ll give you some recent examples to mull over. Previously, Randy Marion Automotive Group ordered 1,000 Class 3 vehicles from Mullen Automotive. Recently, Mullen boasted that it delivered 38 vehicles to Randy Marion.
With Mullen struggling to make headway in a fiercely competitive EV market, I suppose the company has to emphasize every little bit of progress. Thus, Mullen Automotive CEO David Michery took the opportunity to state, “I am pleased to see additional Class 3s are on their way to Randy Marion.”
In another press release, Mullen Automotive celebrated the milestone of 100 Mullen THREE electric trucks having been produced in Mississippi. Granted, the press release didn’t say that Mullen actually sold any of those trucks.
Additionally, Mullen Automotive proudly announced that its Mullen ONE cargo van is certified for sale in 15 U.S. states and the District of Columbia (D.C.) by the California Air Resources Board. Again, this doesn’t necessarily mean Mullen is actually selling vehicles in all of these places.
Finally, Mullen Automotive started shipping Class 3 electric trucks to NRTC Automation Group, which is based in Alabama and has locations in the U.S. and Canada. Unfortunately, the cited report didn’t specify the number of vehicles ordered and delivered.
Is MULN Stock Being Manipulated?
I don’t often bring up the “m” word. Still, I felt it necessary to talk about alleged stock-price manipulation since Mullen Automotive’s CEO raised the topic in a recent shareholder letter. This isn’t something that happens often on Wall Street, so let’s delve into the dramatic details.
According to Michery, Mullen Automotive has “engaged law firms to investigate and file lawsuits based on manipulative trading activities that we believe have occurred with our stock.” Moreover, a separate report states that Mullen has accused several firms of an illegal market manipulation practice known as spoofing.
Clearly, Michery and Mullen aren’t backing down in their legal battle against the alleged manipulators. “We believe that the spoofing litigation provides the best opportunity to sustain our claims as well as recover damages based on the defendant’s market manipulation,” the CEO declared.
Given the downward price trajectory of MULN stock, it’s probably safe to assume that the alleged manipulators would be pushing the share price lower, not higher. If that’s the case, then cautious investors should really think about whether they’re prepared to buy a stock that’s supposedly being manipulated lower.
Mullen Automotive’s Stock Reverse Split is Only a Temporary Fix
Adding to the general sense of drama and consternation, Mullen Automotive recently enacted a 100-for-1 reverse stock split. Michery spun this event as being “in the best interest of the shareholders.”
Let’s be completely honest. Mullen Automotive implemented the reverse share split in order to prevent MULN stock from staying below the minimum bid price of $1 for too long. In other words, Mullen did this to avoid having its stock get delisted from the Nasdaq (NDX) exchange.
Mullen Automotive admitted this, stating, “The Reverse Stock Split is primarily intended to bring the Company into compliance with the $1.00 minimum bid price requirement for maintaining its listing on Nasdaq.” This doesn’t provide any assurance that MULN stock will continue to stay above $1. It also doesn’t solve any of Mullen’s financial issues, such as the company’s lack of profitability.
Reverse splits are generally temporary fixes that don’t assure longevity for the company. They don’t even guarantee that a stock will avoid delisting in the long run. Hence, don’t be too surprised if Mullen Automotive ends up enacting another reverse stock split, or two or three of them, at some point in the future.
Is Mullen a Good Investment?
So far, Mullen has not been a good investment. In fact, MULN stock has seen its value erode by 99.8% over the past 12 months, as indicated by the graphic below. As a result, it has no analyst coverage.
Conclusion: Difficult to Build a Bull Case for Mullen Stock
I would like to see Mullen Automotive continue to report good news. However, the trickle of positive updates just isn’t enough to build a compelling bull case for Mullen stock. In addition, Mullen Automotive has been surrounded by eye-opening drama lately. Unfortunately, Mullen needs more than drama to compete successfully in the increasingly crowded EV market. Consequently, I’m not considering MULN stock as a recommended investment for 2024.
