Mullen Automotive (MULN) stock price has crashed this year, as concerns about the company remained. It has plummeted by 99% this year, making it one of the worst-performing companies in Wall Street.
This crash has brought its market cap to just $13 million, much less than the $240 million it spent buying Electric Last Mile Solutions (ELMS) and the $148 million it bought Bollinger Motors in 2022.
Tesla wannabe in trouble
Mullen Automotive is one of the companies that sought to become a big competitor to other EV companies like Tesla.
However, like other similar companies, Mullen’s business has struggled, and odds of it filing for bankruptcy are rising.
Tesla’s success has meant that building an EV company from scratch is one of the toughest things. Tesla itself almost imploded several times before it became a profitable company.
The same is happening with other EV companies. For example, Rivian, an Amazon-backed EV company has lost billions of dollars in the past few years, and was recently bailed out by Volkswagen.
Lucid Group has also been a cash incinerator in the past few years. It has remained in business mostly because of the funding from Saudi Arabia.
Other EV companies like Fisker and Lordstown Motors have not been lucky as their cash ran out pushing them to file for bankruptcy.
Mullen Automotive, could, unfortunately, join the club as its business continues to experience major challenges.
MULN’s bankruptcy risks remain
The most recent results showed that the company had a net loss of over $326 million in the nine months to June 30. While that was a steep loss, it was a big improvement from the $806 million it lost in the same period last year.
Notably, the company did not record any revenue for the first nine months of the year, an odd situation since it started deliveries last year.
Instead, Mullen Automotive said that it has invoiced its customers for 377 vehicles valued at about $16.8 million. It then deferred the revenue and accounts until the invoices are cleared and the return provision on the vehicles is nullified by the dealer. I believe that this is a big red flag for Mullen.
Mullen Automotive ended the last quarter with over $3.5 million in cash and equivalents, down from over $155 million in the same period last year. Its restricted cash dropped from $429k to $414k in the same period.
Therefore, its balance sheet makes it clear that Mullen does not have the funds it needs to continue its operations since it is losing millions of dollars.
The company is pegging its hopes on a $250 million funding commitment from a group of investors. It has received about $50 million, while $150 million of these funds will be pursuant to an equity line of credit. Mullen also received a commitment from an investor for $100 million in financing.
Still, it is still unclear whether these funds will come. And if they did, Mullen still needs much more money, which explains why the stock has crashed to a record low.
Mullen Automotive stock price analysis
MULN chart by TradingView
The daily chart shows that the MULN share price has been in a freefall this year, and is trading at $1.58. It has remained below all moving averages, while the Average True Range (ATR) has moved flatlined. The ATR is a popular indicator used to measure volatility in the stock market.
Therefore, the path of the least resistance for the Mullen Automotive stock price is bearish, with the next point to watch being at $1. Our base case is where the company files for bankruptcy in the long term as its
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