Shares of Mullen Automotive (NASDAQ:MULN) stock are up by about 75%, although the reason behind the unusually large price surge isn’t exactly clear. Today, MULN stock began trading on a 1-for-100 reverse stock split-adjusted basis, making the surge even more surprising. This is because reverse splits are generally viewed with negative sentiment.
In 2023, Mullen has enacted reverse splits in a cumulative ratio of 1-for-22,500, after previously enacting a 1-for-25 and 1-for-9 reverse split earlier this year.
The increase in MULN stock comes on extremely heavy volume. As of November, there were 413.09 million shares outstanding. After accounting for the recent reverse split, outstanding shares should have declined to 4.13 million shares. However, the volume in MULN exceeded 24 million shares at the time of this writing, meaning that outstanding shares traded hands about six times in just a single day.
Why Is MULN Stock Up 75% Today?
Mark R. Basile, Esq., whose law firm was hired by Mullen to review its funding initiatives, commented on MULN stock’s large move to the upside on X, the platform formerly known as Twitter:
This morning, Mullen announced that it had delivered 38 Class 3 THREEs to Randy Marion Automotive Group (RMA). Mullen has invoiced the dealership $2.5 million for this delivery. Furthermore, the delivery is part of RMA’s $63 million purchase order for 1,000 THREEs. Mullen expects to deliver 150 THREEs to RMA this year with the remainder to be delivered next year.
Still, this news alone doesn’t seem to explain a 75%-plus gain. Could a short squeeze be the culprit?
According to Benzinga, Mullen’s short interest as a percentage of float was 12.06% as of Dec. 11. Generally, a short interest above 10% is viewed as high, while a short interest above 20% is viewed as very high.
Another possibility for today’s large gain may be that buying demand simply exceeded selling pressure.
Based on the price history of MULN, however, shareholders shouldn’t expect this surge to be sustainable. On top of that, CEO David Michery recently disclosed that Mullen will need to raise capital next year in order to survive. That could mean that further dilution is on the way.
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On the date of publication, Eddie Pan 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.
