In my previous article on Mullen Automotive (NASDAQ:MULN), I argued why the limited-side was ideal on the money in its bearishness. Because then, brief-sellers have not only been on the income. They are in the income as perfectly, when it arrives to MULN stock. In a week’s time, it is dropped about 40%.
This plunge has took place, irrespective of current updates on its EV battery development efforts. For occasion, on April 18, when Mullen announced its options to commence construction of battery packs for its lineup of EVs. Also, on April 21, it declared options to carry out exams on its good-condition polymer battery mobile. The firm has claimed its battery know-how will permit its automobiles to get about 600 miles of selection on a full cost.
Why is this happening? Perhaps the meme crowd has wised up. Given that late 2021, since “meme stock mania” started to fade, they’ve been burned quite a few moments. Reddit traders have chased many penny stocks that have deflated in selling price, as an alternative of earning a legitimate “to the moon” shift.
Seeking past the headlines, most likely they’ve compensated much more consideration to the crucial purple flags that encompass MULN inventory. For starters, the allegations that the business has misrepresented the results of its earlier battery testing, an allegation created by Hindenburg Analysis in its really-publicized “short report.”
Regardless of whether or not these allegations prove true, the 2nd crimson flag could sink it in any case. I’m talking about the hefty amounts of dilutive cash increasing Mullen has engaged in about the earlier handful of months. Not only is issuing a lot more inventory “slicing the pie” into lots of more slices (i.e. minimizing upside possible).
These freshly-issued shares will in time obtain their way into the general public market place. The hedge resources that have acquired them (by way of fairness strains of credit rating offers) are champing at the bit to promote. A earnings is all-but-confirmed for them, based mostly on the composition of these specials.
Possibilities are high that it continues resorting to this detrimental type of funding. Inspite of its new capital raises, Mullen stays undercapitalized. In flip, irrespective of the fact it is by now dropped noticeably, it could see supplemental large declines. If it drops underneath the $1 for every share mark, it may close up possessing to reverse-split. A reverse-split could consequence in a lot more downward force from the shorter aspect.
In averting shares, inspite of the glowing press releases about its EV battery technologies, it’s the meme group has seemingly wised up. With this in thoughts, you might want to clever up as perfectly, and steer distinct of MULN inventory.
On the date of publication, Thomas Niel did not have (either specifically or indirectly) any positions in the securities stated in this posting. The opinions expressed in this short article are individuals of the author, subject to the InvestorPlace.com Publishing Recommendations.
The publish Mullen Automotive Battery Information Is Undertaking Tiny to Recharge Exhilaration appeared 1st on InvestorPlace.
The sights and viewpoints expressed herein are the views and opinions of the author and do not necessarily mirror those people of Nasdaq, Inc.