A few weeks back, I said that Mullen Automotive (NASDAQ:MULN) was in the fast lane to zero. Flash forward to now, and it is perhaps apt to say that MULN stock has crashed and burned.
Falling by another 41.2% during this brief time frame alone, shares in this electric vehicle company are now down by around 94.2% year-to-date.
Yet while some speculators may see this as an opportunity to buy a “junker” stock on the cheap, riding it to big profits upon repair, there is simply too much out there that suggests that the company, and by extension its shares, are beyond repair.
Among scores of hard-hit speculative growth stocks, there may be some worthy of a contrarian wager. However, it’s wise not to include Mullen on this list. Among speculative growth stocks, MULN offers one of the worst risk/return propositions. Here’s why.
A Closer Look at MULN Stock
There have been plenty of high-profile disappointments among the early-stage electric vehicle stocks. For instance, despite ample hope and hype surrounding them, Lucid Group (NASDAQ:LCID) and Rivian Automotive (NASDAQ:RIVN) have fallen short of expectations.
Far from becoming serious threats to EV market leader Tesla (NASDAQ:TSLA), both companies are struggling to scale up, and are reporting heavy operating losses. However, both companies look like big success stories compared to Mullen Automotive.
While Lucid and Rivian have at least moved to producing thousands of vehicles annually, this EV upstart has just started to deliver vehicles to customers. High cash burn and dilution worries have weighed on both LCID stock and RIVN stock, but these issues have been much more intense with MULN stock.
Although both of these larger peers have partially diluted their respective shareholders, Mullen has engaged in extremely high levels of shareholder dilution, as I have detailed in past coverage.
Although Lucid and Rivian may each have a long-shot chance of proving skeptics such as myself wrong, Mullen Automotive likely has a no-shot chance of achieving a similar outcome. At least, based upon some more recent concerning developments with the company.
Possible Cash Crunch Ahead
While the aforementioned heavy use of dilutive financing methods has been disastrous for MULN stock, it has enabled the underlying business to stay afloat. However, while this spigot of additional capital has been seemingly endless, it may now be drying up.
Per InvestorPlace’s Thomas Yeung, Mullen’s financing providers have become more reluctant to provide Mullen with additional capital. Clearly, this comes at an inopportune time.
While the company reported it had around $116.1 million in cash on hand as of April 30, this likely isn’t enough to finance its efforts to ramp-up production of its commercial EV offerings.
Much less, make progress bringing its planned Mullen Five passenger EV to the production stage. Worse yet, based on how things have played out for Lucid and Rivian with their initial commercialization efforts, it is doubtful Mullen’s electric van and truck business will turn a profit right out of the gate.
Before a lack of cash robs Mullen of the opportunity to keep growing, the company’s cash reserves could quickly dwindle towards zero in the quarters ahead. If Yeung is right, and the spigot is off, MULN has likely reached the point of no return.
More now than ever, MULN appears destined to be a total loss for shareholders. If you did not heed past warnings, whether from myself, or from other commentators taking a bearish stance on the company’s shares, today is the time to do so.
During 2022, and for most of the first half of 2023, Mullen always had more capital to tap into, in order to keep the dream alive.
Going forward, however, Mullen Automotive may no longer have this opportunity. With access to capital, the possibility of this stock making an epic comeback was remote. Without it, Mullen’s comeback chances are non-existent.
With this, it’s not only the risk-averse investors who should stay as far away as they can from MULN stock. The most risk-hungry of investors have no business owning it, either.
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.