There has again been a spate of news and press releases out of Mullen Automotive (NASDAQ:MULN). MULN stock has traded sideways following these headlines and for a good reason.
These items have been a mix of positive and negative. With this, and how the stock has performed, you can say that they have canceled each other out.
That said, the positive-sounding headlines sound like steps in the right direction for the fledgling electric vehicle maker. With this, some of those “mulling” a purchase of Mullen may see them as factors that justify making the stock a buy.
However, not only do the aforementioned negative headlines just add to the company’s plethora of issues. The positive-sounding news doesn’t necessarily signal better times ahead for the EV maker. There are negative takeaways to be had with each of these items.
With this, let’s dive in, and find out why.
The Latest With MULN Stock
In early July, Mullen shares bolted higher, upon the company’s announcement of plans to repurchase up to $25 million worth of shares.
As this figure represents a large percentage of MULN’s ever-shrinking market cap, investors initially perceived it to be a major positive development.
But after surging by 200% on July 5 and July 6, MULN stock has started to fall back. Perhaps investors are coming to the same conclusion that I did regarding the buybacks. Based upon the details, this proposed share repurchase plan isn’t as bullish as it sounds on the surface.
That said, with “buyback mania” fading, attention now turns to even more recent news items with Mullen.
These include announced plans for a promotional tour of the EV maker’s lineup, as well as the unveiling of the PowerUP, a mobile EV charging truck. These are the “positive” announcements I hinted at above.
Unfortunately, with this “good news” comes some “bad news” as well. I’m talking about a major setback in this EV contender’s quest to produce vehicles with greater range.
As InvestorPlace’s Eddie Pan reported July 11, the company has terminated its Mullen Advanced Energy Operations joint venture.
Finding the Bad in the Good
Beyond the fact that the MAEO shutdown is a setback for MULN stock, it is also possible that the two bits of “good news” mentioned above also end up becoming negatives for shares going forward.
Yes, this at first may sound counter-intuitive. After all, won’t a promotion tour help to boost reservations and sales of Mullen’s vehicles? Possibly.
Not only that, isn’t the launch of a new vehicle model yet another sign that this early-stage EV maker is moving fully into the production stage? To some extent, yes.
Even so, both these developments signal something else. The company’s ongoing cash crunch has resulted in a series of dilutive capital raises. Despite this, Mullen doesn’t seem to be scaling back its plans. It’s still looking to launch new vehicles, as well as promote both existing and planned vehicle models.
Like I also discussed in my last MULN article, even before this news, the EV upstart appeared likely to need to raise more capital at the start of next year.
If Mullen is going full steam ahead with production expansion plans, the potential for more heavy shareholder dilution appears to be a near-certainty.
The Takeaway
The market now gets the message when it comes to Mullen. Shares may still spike on sizzling headlines, but not at the level experienced during this stock’s “meme” heyday in 2021 and 2022.
However, it’s still important to call out hype when we see it, and the latest so-called “good news” with Mullen is as much of a trap as the “share repurchase” news from just a week ago.
Even as new developments emerge, there’s little more to say about MULN, and its merits as an investment. This is a fundamentally weak company, caught amid a dilution spiral (even as management vows not to raise more money this calendar year).
As any subsequent “good news” is likely to offer more negatives than positives as well, consider avoiding MULN stock at all costs to be your best move.
MULN stock earns an F rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
