Mullen Automotive (NASDAQ:MULN) stock was left for dead until a few days ago. The troubled EV maker wasn’t making any money, and didn’t seem to be making any vehicles, either. It was also running short of cash.
Mullen hadn’t seen the good side of $1/share since May and was preparing the ultimate “Hail Mary” pass to maintain its NASDAQ listing, a reverse stock split of up to 1:100.
But then something happened, and our David Moadel called it early. The stock bounced. Since July started Mullen is up 58%. Is it time to “go ape” on MULN stock?
The Hope for MULN Stock
Moadel nailed some reasons for optimism. The company showed off its vehicles at a government buyers’ conference. A single big contract could turn its fortunes around.
Mullen also got cash from an order. North Carolina auto dealer Randy Marion Automotive paid for 22 electric cargo vans. Marion has registered purchase orders worth $279 million. These include orders for 6,000 “Class 1” vans costing $34,500 each and 1,000 “Class 3” trucks, each worth $68,500.
If the sales materialize, and if Mullen can show a profit on them, they would do wonders for the stock price. Mullen’s market cap entering July 6, after its recent gains, was still just $61.6 million.
Then there’s corporate action, led by CEO David Michery, a former music producer. He has accused traders of “naked short selling, spoofing or other illegal acts” aimed at depressing MULN’s stock price.
He engaged a Houston law firm to go after the traders, after Mullen stock hit a low of 10 cents/share.
The Reality
I have been bearish on Mullen. I wrote over a year ago that it lacked cash to fulfill its promises of delivering a profitable EV or polymer battery.
I have never taken a personal position on Mullen stock, neither buying nor shorting. I watched with amusement as it trumpeted a $427,000 position from Citadel Advisors. I saw it quickly lose altitude after making what it called major acquisitions of other failing companies.
Shares kept falling this year. Last month, the stock fell out of the Russell 2000 index after failing to get over $1. Before the latest run-up, it was worth just $30 million.
Michery’s warning did have the desired effect. There were 1 billion MULN shares traded on July 3, the stock rising 58% from that 10 cent/share low. But if you call your broker today and have a quarter in your pocket, you can still get a share.
It’s what traders call a “dead cat” bounce. The joke is that if you’re in a tall-enough building, even a dead cat will bounce when you toss it from a window. Wall Street humor tends toward the cruel.
The Bottom Line
Traders can look at charts all they want. They can go online and tell their followers any stock is going “to the Moon,” and people will believe them.
What I look at are sales and earnings. I’m looking for companies that will be worth more in a year or three than they are now.
The current quarter is the ultimate test for Mullen. Its plant in Mississippi is reportedly turning out Class 1 cargo vans and Class 3 trucks. It has an agreement to develop a low-weight body for that Class 3 vehicle.
If Mullen can make a profit on the Marion orders, then the stock may be worth looking at again. Right now, that still looks like a big if. But I would love to be wrong.
As of this writing, Dana Blankenhorn did not hold (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.
