I don’t want electric vehicle manufacturer Mullen Automotive (NASDAQ:MULN) to fail. Competition in the EV space is a good thing, and the more automakers there are, the better. Yet, MULN stock is at risk of going to zero. Along with that, Mullen Automotive’s existence as a viable business venture is in peril.
Mullen Automotive can probably stave off total share-value destruction for a while longer by enacting reverse stock splits.
That tactic works until it doesn’t anymore. Eventually, the other shoe will drop if Mullen Automotive can’t get its finances in order. While I certainly don’t have a crystal ball, I just can’t envision a happy ending for Mullen Automotive and its stakeholders.
| MULN | Mullen Automotive | $0.81 |
Some Good News for MULN Stock Investors
To be fair and balanced, I’ll start off with a couple of positive developments. First, MULN stock stayed above the well-known Nasdaq exchange $1 minimum closing bid price requirement for 10 consecutive days.
I wouldn’t dust off the streamers and party hats just yet, though. As I’m writing this, Mullen Automotive shares are trading at around 90 cents apiece. So, stay tuned as more delisting threats may be on the way.
The other piece of good news that I’d like to relay to you is that Amerit Fleet Solutions has agreed to provide essential fleet services for Mullen Automotive’s vehicles. These services include “national service and warranty work” to support Mullen Automotive’s “commercial vehicle lineup.”
That’s only meaningful if Mullen Automotive is reporting an acceptable level of vehicle sales and revenue. So, let’s delve into the details and see what’s really going on under the hood with Mullen Automotive.
Mullen Has a Serious Cash Burn Problem
I won’t deny that Mullen Automotive has purchase orders for its vehicles, but this doesn’t seem to have helped the automaker’s top and bottom lines. As Eddie Pan observed, Mullen reported zero dollars in revenue on its recently released Form 10-Q.
Thomas Yeung has compared Mullen Automotive’s financials to a horror film, and frankly, I don’t blame him for making this comparison.
Along with having no revenue and therefore no profits, Mullen Automotive is a fierce cash burner. Believe it or not, the company’s total operating expenses more than doubled from $30.45 million in 2022’s first quarter to $67.89 million in the first quarter of 2023.
And, here’s why it’s so important to always read financial forms. Mullen Automotive’s dropped a bomb with this revelation from the company’s Form 10-Q:
“[T]here is no assurance that the Company will be successful in obtaining the necessary funds to bring its product and service offerings to market and support future operations. [This and other] factors raise substantial doubt as to the Company’s ability to continue as a going concern.”
Now, that’s a fine how-do-you-do. In light of this, I can’t fault Yeung for invoking the dreaded “b”-word: “As Mullen continues to exhaust its financial options, its latest 10-Q report hints at how close to bankruptcy the electric vehicle startup has gotten.”
MULN Stock: Look, but Don’t Touch
I admire any EV startup with a dream and an abundance of gumption. So, I’ll keep rooting for Mullen Automotive until the bitter end. However, I refuse to ignore the company’s financial facts and circumstances. Therefore, I just can’t bring myself to recommend an investment in Mullen Automotive.
At the end of the day, you have to form your own conclusion about Mullen Automotive. Maybe I’ll be proven wrong and the company will succeed beyond everyone’s wildest dreams. Mullen’s “going concern” warning doesn’t seem to point in that direction, though. Hence, the best policy for now is to stay away from MULN stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
