Mullen Automotive Stock Forecast: MULN adds nearly 8% in Friday premarket

• MULN stock drops almost 10 cents after the release of stronger-than-expected US labor data.
• The data increases expectations the Federal Reserve will have to significantly tighten monetary policy, hurting risk assets including stocks.
• Mullen had been on the rise after the company hired a law firm to take naked short sellers to task.
• MULN stock has gained over 200% in 48 hours, jumping from $0.10 to $0.32.

Mullen Automotive (MULN) stock lost some of its strong gains on Thursday afternoon once US data showed the labor market in better shape than economists had expected. Now in Friday's premarket, MULN stock is charging up 7.6% to $0.2375. 

A popular penny stock, Mullen had been enjoying a meteoric rise after the news the company hired a law firm to go after naked short sellers who have been dumping the stock. From trading at $0.10 on Wednesday, it rose to just above $0.32 per share by Thursday, likely in part due to short sellers closing some of their positions, resulting in a short squeeze.

The stock fell almost 10 cents to trade at around $0.23, during the US session on Thursday, however, after the release of US labor market data, as traders interpreted a strong job market as likely to prime inflation. This will inevitably lead to more interest rate hikes from the Federal Reserve (Fed), pushing up the cost of borrowing and creating a headwind for businesses.    

MULN gives back gains after US employment outlook improves

MULN stock declined to fill part of the roughly 50% gap up created between Wednesday's close and Thursday's open, on the back of better-than-expected figures from payrolls giant Automatic Data Processing (ADP), who reported 497K more jobs had been filled in June – economists had forecast only 228K from May's 267K. 

In addition, Continuing Jobless Claims fell to 1.72 million versus 1.75M forecast, and below the 1.73M prior. Challenger Job Cuts showed 40.7K cuts – half the 80.1K previously. Initial Jobless Claims data was the only labor market print on Thursday that was negative, after showing a higher-than-expected gain of 248K compared to the 245K expected.   

A stronger labor market suggests inflation will remain high, as more people earn and spend, leading the US Federal Reserve (Fed) to hike interest rates. This in turn will make it more expensive for companies to borrow as well refinance their existing liabilities. 

Mullen stock news: Hiring Christian Attar law firm

The euphoria that had surrounded Mullen stock prior to the correction is a product of the company hiring the Christian Attar firm to bring charges against alleged naked short sellers and others who it believes have attempted to manipulate the MULN stock price. Naked short selling is when a market participant sells short a particular stock without first borrowing actual shares. This illegal practice allows traders to short more of a given stock than the number of tradable shares existing in the market. 

Formerly called the Christian Levine Law Group, Christian Attar will work in partnership with Warshaw, Burstein and LLP to combat the alleged market manipulation. Mullen said it has received reports from a company called ShareIntel that such naked short selling has occurred in the recent past.

The most recent information shows that slightly more than 27 million shares of MULN stock was sold short, according to financial news website Benzinga.com.

“Since our announcement on April 28, we have been actively investigating naked short selling, and we now have enough intel to have the law firm actively investigate and, where justified, take action against any market manipulators using naked short selling, spoofing or other illegal acts,” said CEO David Michery in a statement.

Lost on no one is that the electric vehicle manufacturer’s extreme dilution in the first half of 2023 is the major culprit in the MULN share price losing nearly 98% of its value this year alone. In order to ramp up production of its Mullen One delivery van and its Mullen Three cab chassis, Mullen sold on the order of 2.3 billion shares and/or warrants. This grew the overall share count by about 10 times over.

Mullen had a cash position of $235 million as of June 23, which Michery says should give the company a 12-month runway at least. Mullen can also finally leave its mantle as a “pre-revenue” company behind. On June 29, the company announced that it had sold 22 Mullen One EV cargo vans to Randy Marion Automotive – a dealership based in North Carolina – for $308,000. This is the first official revenue the company has received, and it will be reported on Mullen’s second-quarter results.