Mullen Automotive (MULN) stock price popped: A dead cat bounce?

By:
on Sep 12, 2023
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  • Mullen Automotive share price has bounced back in the past 2 days.
  • The company acquired battery pack production assets from Romeo Power.
  • The stock’s upside could be limited since the company faces substantial risks.

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Mullen Automotive (NASDAQ: MULN) stock price jumped by more than 15% on Tuesday as investors cheered the company’s latest acquisition. The shares jumped by as much as 20%, its best day since August. They have plunged by more than 90% this year.

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Why is MULN stock soaring?

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Mullen Automotive stock price is in a recovery mode for two main reasons. First, the embattled EV company acquired battery pack production assets from Romeo Power in a deal valued at $3.5 million. 

As part of the deal, Mullen will take the company’s intellectual property, equipment, and inventory. The equipment includes production line for EV pack assembly, battery testing, and precision R&D modules among others. Mullen hopes to use this technology to build its own batteries.

Mullen Automotive has spent millions of dollars in acquisitions in the past few months. It acquired Electric Last Mile Solutions (ELMS) and Bollinger Motors in 2022 for over $388 million. Today, Mullen has a market cap of just $95 million, according to WeBull.

Second, Mullen Automotive stock price jumped as other EV companies did well. Tesla share price has jumped by more than 10% since Monday. Other EV stocks like Rivian and Lucid Motors have also soared. A likely reason is the new lithium discovery in the US, which I wrote here. That discovery is expected to maintain lithium prices lower.

Still, there are concerns about Mullen Automotive’s ability to become a viable player in the electric vehicle industry. For one, history of other EV companies like Rivian and Lucid shows the need for a fortress balance sheet.

The two companies, which have been ramping up production, are spending millions of dollars every quarter. Data by WeBull shows that Mullen had $214 million in cash at the end of the second quarter. 

While this is a good amount, the company’s net loss was over $308 million.  This means that it will need more cash soon now that it has started a share buyback program.

Mullen Automotive stock price forecast

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MULN stock

Regular readers know that I have been bearish and short Mullen Automotive stock price for a long time. My bearish view on the stock has been right since it has plunged by over 90% this year. Along the way, Mullen has become a penny stock. 

The current rebound happened after the company formed a falling wedge pattern on the hourly chart. In price action analysis, this is one of the most bullish signs in the market. MULN stock’s volume has also been dropping, as shown in green. 

Therefore, I suspect that the Mullen share price will resume the downward trend and retest the next support at $0.40. This price is about 20% below the current level.

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