Mullen Automotive (NASDAQ:MULN) stock has fallen more than 80% in 2022 and we have seen similar declines in other electric vehicle stocks. Last year, the electric vehicle company climbed to $15.90. It seems hard to believe that it has since struggled to maintain the $1 mark. The blame has to go toward macroeconomic factors and the lack of concrete catalysts for Mullen.
On June 27, the electric vehicle manufacturer became part of the Russell 2000 and 3000 Indexes, post-market open. Apart from this, there are very few things Mullen bulls can look toward.
The saying “buy the rumor, sell the news” has been around for decades and is still relevant today. While it might sound like a cliché to some people — it’s a way of making money while investing in information.
The selloff happened as my colleague Ian Bezek predicted, and now the dust is settling. Unless there are more positive catalysts, MULN stock will continue to fall. And it needs major announcements to stay aflot in the current environment.
William White, an InvestorPlace writer, reported that Mullen’s debt is much lower today than before. The EV maker cut its total obligations by $17.5 million and now owes about $11 million from approximately $30 million last year. However, this isn’t enough to boost the stock price. Instead, investors want more information regarding contracts and new models. Unless that happens, the company remains a risky play.
Why Is MULN Stock Down?
The main reason why Mullen is not doing well is because of the fears surrounding excessive dilution. Like most EV plays, Mullen is a Reddit darling. Therefore, its stock price ballooned once Reddit investors got behind it. Mullen’s primary way to raise capital is via its share price.
This method allows the company to raise large amounts of cash at a fast rate and in a fair manner. To ensure that the company can use this tool successfully, it has staggered its public offerings not to saturate the market and provide an effective, long-term solution for shareholder growth.
The commercialization of electric vehicles takes time. It also requires a lot of capital. As Q2 ’22 draws close, Mullen expects to report over $61 million in cash. That is not enough capital for the company to commercialize its ambitions. It will have to tap the equity markets, which can become tough in the current environment.
In addition, Mullen did not do itself any favors when it did not reveal the name of a major Fortune 500 customer by June 30. As Larry Ramer said on July 2, the automaker reportedly received an order for vans from a “major Fortune 500 company.” June 30 came without news of the automaker’s Fortune 500 customer. This added further pressure on MULN stock.
Why Are the Bulls Interested?
Mullen is set to begin its “Strikingly Different” tour in the U.S., stopping in 19 cities, where it will present its new car — the Mullen FIVE. The design has been received well, with many people believing it will bring new excitement to MULN stock.
Mullen Automotive is also focusing on creating its battery — with more powerful energy density and at nearly 50% less cost than lithium-ion batteries. This will allow Mullen Automotive to work continuously to improve their product while also lowering manufacturing costs.
Mullen announced that it had preliminary proof that its battery exceeded expectations. These batteries have been developing for years, and the early results show great improvements in both amperage and volume.
The news is important because it will help you increase your battery pack’s efficiency. Mullen hopes a 150 kWh solid-state battery will help a car go 600 miles without charging. If the technology works, the power source will revolutionize personal transportation.
Despite the effort to produce new technology, it is important to remember the positive impact it can have on businesses and people. Solid-state batteries have a lot of advantages over traditional battery technologies. But there are still some huge technological challenges standing in the way of it reaching implementation on a large scale.
MULN Stock Is Too Risky
Electric vehicles are quickly becoming the future of transportation. This is because they are more environmentally friendly and potentially cheaper than cars that run on gas or diesel. However, the market for electric cars is still small compared to conventional cars, and there’s a lot of growth potential.
There are also still concerns as many of the advancements and successes in EV technology were due to favorable macroeconomic conditions. Hence, it’s time to separate the wheat from the chaff. In the current environment, you can only invest in companies with sound fundamentals; otherwise, you stand to get substantially burned.
At this stage, investing in safer stocks is better until MULN provides concrete reasons to remain interested.
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On the publication date, Faizan Farooque did not have (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.