EV manufacturer Mullen Automotive (MULN) faces serious financial challenges. Plagued with repetitive losses, the company has been employing aggressive strategies such as reverse stock splits to maintain its NASDAQ listing, and it has taken steps to stabilize its financial position, announcing the sale of up to 85 million shares on the conversion of notes and exercise of warrants. The company’s efforts to bolster its standing extend to new product offerings, leadership changes, and the securing of substantial orders, all while facing the harsh reality of dramatic losses.
The hope of a brighter future abounds, but investors may want to avoid this situation until the company can demonstrate sustainable financial success.
Mullen Secures a Financial Lifeline
Mullen Automotive is an electric vehicle manufacturer that produces both passenger and commercial vehicles. Its operations primarily involve rebadging Chinese captive imports, though it is presently developing a premium compact SUV called the Mullen Five.
In August, the company received a substantial order from GAMA for its commercial micro-urban delivery vehicle, Mullen-GOs. Mullen has also negotiated deals for new vehicle orders from Pape Truck and Volt Mobility, valued at $3.2 million and approximately $210 million, respectively, promising significant revenue generation in the coming months.
The company recently announced a 1-for-100 reverse stock split to comply with NASDAQ’s $1.00 minimum bid price requirement. Management also took steps to secure a $250 million financing commitment, which includes a $50 million immediate investment, an equivalent one-year additional investment right, and a $150 million equity line of credit. Further, Mullen signed an agreement with an investor for a $100 million investment through the issuance of senior secured convertible notes and warrants.
Analysis of Mullen Auto’s Recent Financials
The company recently announced its third-quarter financial results. Year-to-date, Mullen has invoiced 377 vehicles, yielding a value of $16.8 million. However, the company decided to defer revenue and accounts receivable recognition until invoices are cleared and the vehicle’s return provision is nullified by the dealer’s vehicle sale to the end client. This resulted in a net loss of $289.9 million, with earnings per share of -$7.91.
As of quarter end, the company reported total cash, cash equivalents, and restricted cash of $4.0 million, a significant decrease from the $155.7 million a year ago. Working capital for the period ran at a deficit of $59.0 million, a stark contrast to the positive working capital of $58.5 million in the same period last year.
Bottom Line on MULN
Facing considerable financial obstacles, Mullen Automotive continues to employ aggressive tactics to maintain its NASDAQ listing and stabilize its financial position. However, despite these efforts, the looming reality of significant losses persists. While the company has signed various deals promising considerable revenue in the future, it reported a net loss of $289.9 million and an earnings per share of -$7.91 in its recent financial results. With a stark decrease in total cash and a working capital deficit, the road to sustainable economic success remains uncertain for Mullen.
Investors are cautioned to observe future developments and the company’s ability to translate strategies into stable financial growth before getting involved.
