MULN stock pares gains amid the Wall Street retreat

Update: Mullen Automotive (MULN) hit two-month highs of $1.67 on Wednesday, although retreated sharply to settle the day at $1.42. Despite the late pullback, the MULN stock price gained 1.43% on the day. The shares of an emerging electric vehicle (EV) manufacturer surged after the company announced results of Mullen’s solid-state polymer battery testing with the Battery Innovation Center (BIC) in Indiana. MULN shares failed to sustain at higher levels, as it felt the heat from the broader Wall Street indices. The major US indices declined after upbeat ISM Manufacturing PMI poured cold water on the aggressive Fed tightening delay optimism.

Mullen Automotive (MULN) stock is once again making waves as the company announced what appeared to be positive test results from its latest battery. Investors in this name are mostly retail and tend to seize on the latest news and squeeze the stock higher. We have outlined many times our view on this stock but also realize that short-term momentum can be a powerful trading ally. Overall, we remain highly skeptical about this company and urge extreme caution. Short-term momentum trading can be profitable but needs careful risk management.

MULN stock news

Mullen announced on Tuesday that "Testing results from BIC show the solid-state polymer cell, rated at 300 Ah and 3.7 volts, tested in at 343.28 Ah at 4.2 volts, exceeding expectation and in line with test tolerance from previous EV Grid test results."

The statement added: "It is expected that with this technology when scaled to the vehicle pack level, a 150-kilowatt hour solid-state battery can deliver over 600 miles of range on a full charge for the Mullen FIVE EV Crossover. In general, solid-state batteries offer higher energy density, faster charging time, smaller size, and safety compared to traditional lithium-ion cells."

Management appears quite giddy over the test result. “I’m impressed with the ongoing performance of the solid-state cell after going thr[ough] multiple intense testing sessions from accredited testing facilities,” said David Michery, CEO and chairman of Mullen Automotive. “The battery has performed exceptionally well, and I’m pleased with the results from BIC in Indiana.”

So far so good. One caveat here is that we have no idea on the size of the battery as this was one major controversy highlighted in a Hindenberg report recently. EV Grid was quoted as saying the battery was quite large. This leads us to assume it may not be workable in an electric vehicle.

“It was big, which created question marks in my mind too. And it was misshapen and really kind of an ugly thing,” EV Grid CEO Tom Gage was quoted in that Hindenberg report. Gage did later attempt to partially clarify some of this statement in a Risk On interview, so again do not take it as set in stone, but it does raise serious question marks. There is a lot of speculation and conjecture around this name, so it is important to retain a healthy degree of skepticism. We tend to err on the side of caution. There are too many uncertainties surrounding MULN. Maybe it hits a home run, but we think that unlikely.

From a purely financial standpoint, MULN is unlikely to survive, irrespective of the conjecture surrounding the Hindenberg report. Mullen is burning through a lot of cash. The latest cash flow to the end of March shows net income dropping by nearly $33 million in the quarter. MULN is raising equity and debt financing to survive. It has $65 million in cash, which is enough to survive two quarters. The total number of shares outstanding has increased over ten fold in the quarter from 23.9 million to 289.8 million, so shareholders have been massively diluted. This is not sustainable.

MULN stock forecast

Witness how each spike fails progressively lower and lower, a feature of hype stocks and huge volatility names. This is our view, feel free to make your own, but this company has no revenue and has massively increased its share count over the recent past. The battery testing may or may not turn out to be accurate, but looking at pure financials and share dilution makes this name highly uninvestible.

MULN daily chart

Previous updates

Update: Mullen Automotive (MULN) closed Thursday up at $1.42 per share, adding 1.79% on the day. Wall Street started the day with substantial gains, but quickly turned red, as investors remain concerned about price pressures and potential monetary policy tightening. An upbeat US ISM Manufacturing report pushed investors away from bonds' safety, which in turn resulted in higher US government bond yields. The yield on the 10-year Treasury note peaked at 2.95% also up on speculation inflation will continue to march higher. The Dow Jones Industrial Average lost 0.54% or 177 points, while the S&P 500 settled at 4,122, down 10 points. Finally, the Nasdaq Composite shed 0.35%.

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