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Just say no! 4 reasons to avoid Mullen’s stock (MULN).


Judging by a large number of articles on Mullen Automotive (NASDAQ:MULN), and the number of people talking about the MULN stock on social media, Mullen has become a top meme stock with a considerable cult following. However, as hot as it looks from the outside, the company doesn’t seem trustworthy to me. I also believe that the company could declare bankruptcy at some point. In fact, there are several reasons why I believe this.

First, the CEO would have a faulty record. Second, the company reportedly announced deals that weren’t that impressive. Third, the company would have insufficient financial resources and would not have succeeded in obtaining the support of large companies. With this, investors can consider staying away from the MULN stock. That is unless they plan to short sell the stock. Here’s more on why MULN should be avoided.

Reason #1: The CEO has a very flawed record

Hindenburg Research, for example, noted that Mullen CEO David Michery “led 5 penny stock companies into bankruptcy before Mullen. Two had their securities registration revoked by the [U.S. Securities and Exchange Commission] SEC, two terminated their title registrations and the last merged with a speculative gold mining company.

Hindenburg, who was short of MULN at the time, added that a company called EV Grid denied Michery’s claim that he determined that the range of batteries developed by Mullen “were almost double that of other major electric vehicle companies” and that they “charged faster than other batteries”.

Moreover, last January, Michery claimed that the company would start selling its incredible batteries in 18 to 24 months. However, despite the media coverage the company has received, I have heard very little about these batteries in the last six months.

Also, last year I conducted research on one of two organizations that Mullen says tested his batteries. This organization – Battery Innovation Center – placed a man with no relative experience in charge of battery testing and his main activity seems to be giving lectures. The other organization Mullen cited – EV Grid – was not at all impressed with Mullen’s batteries. Finally, after Michery said in March 2022 that Mullen would reveal the name of a Fortune 500 customer who had ordered electric vehicles from the automaker, the company never revealed the information. And, after being pressed on the matter, the CEO explained that the limited company only asked Mullen if it could make a better electric vehicle than what it was offering.

Reason #2: Offers don’t stand up to scrutiny

Mullen announced several deals that, at first glance, seem impressive, but are actually nothing exciting.

For example, on December 15, Mullen announced that it had secured an order for 6,000 of its electric vehicles from Randy Marion Isuzu. But further research revealed that Randy Marion Isuzu is a unique car dealership. As a result, the idea of ​​buying thousands of electric vehicles from Mullen seems implausible. In July, Mullen revealed it would sell “up to 600 Mullen Class 2 electric vans over the next 18 months” to “an Amazon delivery service partner.”

However, my research showed that this “Amazon delivery service partner” only employed 12 drivers and owned or leased a grand total of six vehicles. The idea of ​​such a company buying 600 electric vehicles from Mullen is laughable. Also noteworthy is Mullen’s use of the phrase “up to 600 vehicles” to describe the deal. As I wrote previously, “four EVs, two EVs, or one EV can be ‘up to 600 EVs’.”

Reason #3: A lack of adequate financial resources

At the end of the third quarter, Mullen had just $54 million in cash on its books. That’s really a miniscule sum for a company taking on the hugely expensive task of building electric vehicles (and, who knows, maybe they’ll build batteries too).

Moreover, like another InvestorPlace Columnist Thomas Niel reported in his January 24 column: “MULN’s share count has grown from about 23.4 million to nearly 1.7 billion over the past year. Apparently, the automaker is looking to sell even more MULN stock now.

The company’s huge reliance on using its shares to raise funds is causing a downward cycle. First, MULN sells additional shares, lowering the value of its shares. Because the value of her shares has fallen, she raises less money by selling each additional share at the next point where she unloads shares to raise cash. Therefore, he has to sell even more shares to raise enough funds to stay afloat, starting the process all over again. This process is likely to end in tears. And showing that the crying is likely to start sooner rather than later, Mullen issued a going concern warning.

Reason #4: No leading investors

Other electric vehicle start-ups, such as QuantumScape (NYSE:QS), Arrival (NASDAQ:ARVL), and Rivian (NASDAQ:SHORE) have huge expenses and accumulated large debts. but these companies have received investment from large companies, such as UPS (NYSE:UPS), volkswagen (OTC:VLKAF), and Amazon (NASDAQ:AMZN). Not only can these EV start-ups use the money they got from their investors to start their operations, but, I believe, investors can make it easier for start-ups to get additional funding. In other words, large investors, through their many connections, can convince other large companies to invest in start-ups and persuade banks to grant them large loans. Seemingly lacking such major investors, Mullen is much more likely to run out of money soon.

As of the date of publication, Larry Ramer has held long positions at RIVN and ARVL. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Larry Ramer has researched and written about US stocks for 15 years. He was employed by The Fly and Israel’s largest business newspaper, Globes. Larry started writing columns for InvestorPlace in 2015. Some of his highly successful contrarian picks include PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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