Mullen Stock: Out of Gas and Out of Luck

Don’t say you were not warned.

Two months ago, almost to the day, as Mullen Automotive’s (NASDAQ:MULN) plummeting share price slipped below $0.20 per share and showed no signs of slowing down, David Michery — CEO of the electric vehicle start-up — told investors that while Mullen would “use our best efforts to regain compliance to meet Nasdaq’s requirement for a $1 minimum bid price,” things were not looking good. “If Mullen stock fails to trade above $1 for a minimum of 10 consecutive business days prior to Sept. 5, 2023,” said Michery, “the Company will implement a reverse stock split to cure the Deficiency prior to” said date.

And now that time has come.

On Wednesday, May 3, Mullen announced that it will implement a 1-for-25 reverse stock split, which became effective today. And if you own Mullen stock right now, here’s what that means for you:

Take however many shares of Mullen you thought you owned yesterday, and divide by 25. If you owned 100 shares on Tuesday, you’ll own just four shares on Thursday. If you owned 100,000 shares yesterday, you’ll own 4,000 tomorrow.

On the plus side, of course, those shares will be worth more than the $0.06 they cost today — 25 times more, actually, or about $1.50 a share — as Mullen’s share price automatically adjusted 25x higher. The question is: how long will they stay at $1.50?

You see, the only reason Mullen has acceded to the reverse stock split option is because Mullen has made its “best efforts” to fix its business and get its share price back over $1 organically — and these best efforts have failed entirely. Now that Mullen has admitted its failure, it’s likely a lot of investors will be forced to come to the same conclusion.

Indeed, you could say a lot of them already have come to this conclusion. Mullen stock is down 18% on Thursday, after the announcement.

Investors sold off Mullen stock despite Mullen boasting, several hours before making the reverse split announcement, that it possesses $116.1 million in available cash, and has orders in hand worth $263 million more for the sale of “Mullen Class 1 and Class 3 EV Vans and Trucks” to Randy Marion Automotive Group. Add those two numbers up, and it sounds like Mullen stock — which has a market capitalization of only $242 million — should very soon have more than $1.50 in the bank for every $1 its shares are worth!

Except for the fact, you know, that Mullen is burning through $85 million in cash per year. And except for the fact that, before it can sell $263 million worth of EVs, it must first buy all the parts and raw materials needed to build them.

Unfortunately for Mullen, it now appears that investors are finally taking a good hard look at the caveats behind this company’s numbers. And it sure looks like they’re concluding that Mullen Automotive is just another failing EV manufacturer, with nothing more than promises to sell — and investors who are tired of buying the hype.

Overall, MULN has a Smart Score of 2 (out of 10) on TipRanks, meaning that it is likely to underperform the market. (See MULN stock analysis)

Smart Score is TipRanks’ proprietary quantitative stock scoring system that evaluates stocks on eight different market factors. The result is data-driven and does not involve any human intervention.

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