Mullen stock price went parabolic: is MULN a good buy now?

Mullen Automotive stock price jumped by more than 100% on Monday, making it one of the top companies in Wall Street. MULN stock jumped to a high of $0.4805 on Monday, its highest point since April 29. It has jumped by over 212% from its lowest level this month.

Why MULN stock price surged

Mullen Automotive is an electric vehicle company that has lost its shine in the past few years. Its stock has plunged by almost 100%, bringing its market capitalization to less than $9.6 million.

At its peak, the company had a market cap of over $600 million as investors piled into EV companies. The high stock price also helped the company to acquire several companies, including Bollinger Motors, Electric Last Mile Solutions, and Romeo Power Assets. 

Mullen Automotive recently acquired battery equipment from Nikola, the bankrupt hydrogen truck company. 

The challenge, however, is that Mullen Automotive has been a cash incinerator and its vehicles have not become highly popular. 

Mullen stock price surged on Monday after the company published an SEC filing saying that it would delay its audited financial results. However, the company also released the unaudited results, which showed that its revenue will be $4 million.

Mullen also said that it expected to narrow its loss from $171 million to $53 million as the company reduced its research and development spending. This reduction was understandable as the company has now moved to building and selling its vehicles.

Mullen Automotive attributed the delayed results into more analysis because a court placed Bollinger into receivership because of its high debt load. Also, the delay was because of the potential transfer of the Mishawaka facility to the settlement agreement. 

Therefore, the MULN stock price surged as investors cheered the improved financial performance and the demonstration that its business was doing well. This performance was further amplified by the fact that it is a highly shorted penny stock.

Is Mullen a good investment?

We have been warning about Mullen Automotive for many years, as you can see here, here, and here. 

The most important bearish case is that the company does not have the balance sheet to sustain its cash burn. 

For example, the recent preliminary numbers showed that the company will have a net loss of over $54 million in the second quarter. That is a big number for a company that lacks a supportive balance sheet, with the most recent results showing that it had just $2.3 million in cash and equivalents. 

It also has $10 million in debt, short-term debt of over $3.2 million, and accrued expenses of over $37 million. 

Some companies can operate and thrive with such a balance sheet. For that to happen, they need to have a higher stock price, which allows them to raise cash by selling shares. In Mullen Automotive’s case, its stock has a market cap of less than $10 million, making it hard to raise cash.

Read more: Mullen Automotive could be the next Fisker and Lordstown Motors

MULN stock price analysis

The daily chart shows that the MULN share price has been in a free fall for a long time as concerns about its future rose. It has remained below all moving averages and is now hovering at its all-time low. 

Short squeezes are common for troubled penny stock companies like Mullen Automotive, which explains why it surged on Monday. The long-term outlook for the stock is bearish as bankruptcy risks remain.