Is Mullen Automotive Legit?

Mullen Automotive (NASDAQ:MULN) stock has been controversial over the last few years. The American electric vehicle (EV) maker has made big acquisitions and announced exciting new models, but the company has yet to deliver more than a handful of vehicles.

Production delays and lack of revenue have caused many investors to lose faith. The stock is down around 86% year-to-date to $1.07. That’s amazing considering MULN was selling around $400 in mid-2020. Even from the 52-week high of $42.75, there’s been a major selloff.

The company is listed on NASDAQ, but it’s had trouble meeting the $1 minimum bid price that NASDAQ mandates. Mullen had to perform a 1-25 reverse stock split in May of this year just to meet the requirement.

But MULN still has believers. An active Reddit community has built up around Mullen that asserts the stock has been a victim of short-selling, and that the company’s EVs will take the market by storm once they’re released. Despite the positive buzz, MULN hasn’t quite reached meme stock status yet.

So is Mullen Automotive legit?

Mullen Automotive Overview

The company has announced multiple vehicle lines, including cargo vans, SUVs, off-road vehicles, sports cars, and delivery trucks. But getting assembly lines in place to produce them has been a struggle. So far, only 4 cargo vans have been delivered for one customer.

The company has also continued to delay its flagship FIVE SUV’s arrival. Now Mullen expects FIVE production to begin in the 4th quarter of 2024 or even early 2025. Couple that with another quarter of nonexistent revenue, and it’s easy to understand why investors are nervous.

But that hasn’t stopped Mullen from forging ahead. In September 2022, the company announced the acquisition of truck maker Bollinger Motors. This $148.2 million deal expands the Mullen line to include medium-duty and off-road trucks.

On the heels of that deal, Mullen bought bankrupt Electric Last Mile Solutions (ELMS) in a $105 million dollar acquisition. Mullen plans to use ELMS production facilities to produce the FIVE and Bollinger models faster.

MULN Q4 Ups and Downs

For all the exciting announcements, the financials are concerning. A fourth-quarter net loss of $376.9 million was an over 140% increase from the net loss of $156.1 million in the same quarter of 2021. The loss was attributed to increased expenses in ramping up production and the Bollinger and ELMS purchases.

The company does have a healthy cash stockpile of $100 million in spite of the losses, with another $90 million on the way. Still, if production does ramp up, it will quickly eat into that stockpile and Mullen may need to go looking for more cash.

A major positive for the company is a December 2022 order for 6,000 Class 1 Mullen Cargo Vans. Charlotte-based Randy Marion Automotive Group entered into a $200 million agreement with Mullen to be the first auto dealer to sell, service, and provide parts for Mullen’s commercial vehicle product line. To date, four vehicles have been delivered on this deal.

Despite this victory, the company’s fourth quarter was rocky. Non-existent revenue and continued production delays will be enough to cause many investors to look elsewhere. The reverse stock split got the company over the hump, but the stock price dropped shortly after.

Mullen Automotive Competitors

There’s no doubt that EVs are going to be in high demand over the coming years. But there are also plenty of competitors in the space. Tesla has established itself as the brand to beat and has the number-one-selling EV.

Major automakers have quickly followed suit and produced their own EV models, to varying success. And there are plenty of upstarts like Rivian, Nio, Lucid, and others, many of whom are much better established than Mullen.

But the company still believes it can differentiate itself. The FIVE is a fast-charging compact SUV that can go from 0 to 60 in 3.2 seconds and reach up to 155 mph speeds. The over 1,000 horsepower FIVE RS goes even faster, up to 200 mph. Mullen’s Facial recognition software means that you won’t have to unlock the car with a fob. Your car will recognize you and unlock itself.

With a starting price around $55,000, it’s easy to understand why there’s such a buzz around the car and the automaker. While that sounds great, the longer it takes to get the vehicle on the roads, the higher the chances are that other automakers will close the gap before the FIVE even hits the market.

Will Mullen Automotive Recover?

Mullen Automotive is an American EV maker that has announced some groundbreaking technology, but so far it’s been unable to deliver on its promises. Still, the company has a fervent group of supporters who will point to the company’s exciting acquisitions and emerging production as signs that the company is legit.

While Mullen might be legit, it doesn’t have any revenue and it hasn’t been able to ramp up production. These issues have caused all but the most fervent of investors to pull their money out and look elsewhere. The recent stock split accomplished its purpose but did little to help the company’s money issues. Given the high interest rates, debt isn’t a good way to raise capital either.

If the company does secure more funding it will only dilute shares and further mitigate the gains that investors have hoped for. And if production does ramp up, it’s likely to drain even more money in the short term, before vehicle production costs even out.

If vehicle deliveries are further delayed, other more established competitors may come out with similar vehicles and eliminate MULN’s competitive advantage. While the low stock price may be reason enough for some to gamble on the stock, consider it just that. When the shadow of bankruptcy is looming over a company, only the most speculative investors should buy in.

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