Mullen Stock News: MULN declines 7.6% on Tuesday, Charlie Munger of Berkshire Hathaway fame dies

Mullen Automotive (MULN), a popular electric vehicle (EV) penny stock, gave up 7.6% on Tuesday, holding relatively flat after the first hour's descent. Shares of the California-based company have trended 39% lower over the past month as the market awaits a shareholder vote on another reverse split scheduled for December 15.

News emerged late in the day that Warren Buffet's right-hand man, Charlie Munger, had passed away at 99 years of age. Munger was a favorite sage among stock investors for half a century. He and Buffet had a 60-year partnership in building Berkshire Hathaway (BRK) into an equity juggernaut. The holding company closed on Tuesday with a market cap just shy of $783 billion.

The EV stock pulled back to $0.1640 in Tuesday’s session, while the US stock market rallied in the final hour to have the S&P 500, NASDAQ Composite and Dow Jones all eke out slight advances.

Mullen stock news: Response for Mullen ONE filed with US Customs & Border Protection agency

On Monday, MULN stock closed slightly higher on news that it has filed a response alongside Rapid Response Defense Systems with US Customs & Border Protection (CBP), the federal agency that enforces law regarding customs duties, immigration and international trade.

The filing is a response to CBP’s questions regarding the sourcing of components used in the manufacture of Mullen’s Class 1 EV cargo van – the aptly-named Mullen ONE. The cargo van is manufactured at the company’s plant in Tunica, Mississippi, but uses parts sourced from distributors in South Korea, Germany, Romania, China, Canada and the US. 

Rapid Response is a federal government contractor that is party to a $2.7 billion contract for federal vehicles with the General Services Administration. The company sources equipment and supplies for the US intelligence agencies, the Department of Defense and a number of other federal agencies such as CBP.

Back in March, Rapid Response named Mullen as its exclusive provider for Class 1 EV vehicles since the Mullen ONE is the only Class 1 EV available in the US market. 

“With the federal government’s strong interest in electrifying a growing portion of its vehicle fleet, Mullen’s commercial portfolio is very well positioned," said Fred Bouman, Rapid Response’s SVP – Federal, in a March statement.

Mullen will join Rapid Response in showcasing the Mullen ONE at a government vehicle conference in January 2024. Any large-scale contract with the federal government would be a big boost to Mullen’s reputation, as well as its balance sheet. 

At the moment though, shareholders are focused on the December 15 meeting, wherein CEO David Michery will attempt to get the votes to enact the third reverse-stock split of the year. As per an agreement with the NASDAQ exchange, Mullen needs to raise its share price above $1 by late January of next year. The board has already approved a ratio of between 1-for-2 and 1-for-100.

Penny stocks FAQs

What is a penny stock?

Originally, penny stocks were any stock that traded for less than $1, i.e. pennies. The Securities & Exchange Commission has since altered the definition to include any stock that trades for less than $5. Penny stocks are typically associated with small companies that have either experienced poor results, sending their share price down, or with companies who dilute their share price by issuing lots of shares over time in order to fund operations or acquisitions.

Where do penny stocks trade?

Some penny stocks trade on respected exchanges, such as the NASDAQ or the NYSE. Examples of these are Mullen Automotive (MULN) and Bark (BARK). Those exchanges have requirements though. For the NYSE, listed stocks must have 1.1 million publicly traded shares outstanding with a market value of at least $40 million. The NASDAQ requires a share price minimum of $4, a minimum of 1.25 million shares and a market cap of $45 million. Most penny stocks, however, trade on the OTC (over-the-counter) market. This may mean the OTC Bulletin Board or the privately-owned OTC Markets Group.

Why are penny stocks so volatile?

Quite often the sharpest movers on any normal trading day are found among penny stocks. This is because non-penny stocks tend to have more liquidity, and the market is more certain about larger companies’ long-term values. Penny stocks are illiquid, meaning there is little supply available if an announcement drives more buying demand into a particular stock. There are no market makers that hold large amounts of penny stocks just to dispense them at a slightly higher price point. Additionally, most of these penny stocks suffer from a news desert where few market players know anything relevant about them. This is why a small biopharma company can issue news about a successful drug trial and immediately rocket 500% higher, with no analysts on Wall Street covering it.

Should I invest in a penny stock?

Typically, the answer is “No”. Penny stocks are more risky than higher-priced stocks on average. Penny stock investors have a higher chance of losing their capital by investing in weaker companies. There is a reason why they are penny stocks in the first place, which is that largely the mainstream market is not interested in investing in them. Two groups of investors tend to focus on penny stocks, however. The first group are day traders, who know that the lack of liquidity in penny stocks could lead to extremely large swings over a short time period. The other group is made up of investors who like the fact that these stocks are disregarded. This allows these investors to gain an advantage by benefiting from upcoming announcements, because the larger market is not paying attention.

Mullen stock forecast

Mullen stock has lost its supportive perch in the $0.1800 to $0.1700 range that lasted for the past two weeks. Once again MULN is descending lower as shareholders exit the company ahead of the reverse split vote. Investors like stock splits but not reverse splits for the most part.

MULN trades beneath its 9-day Simple Moving Average (SMA), always a bad sign. For a rally to emerge, bulls must first push MULN above the $0.2210 level that acted as the previous support floor in late October. This level coincides with the 21-day SMA, which gives it more significance.

MULN daily chart