Mullen short interest: MULN stock price rebounds on acquisitions, positive EV production timeline

Despite the company’s many attempts to keep the market happy by sharing some seemingly positive developments concerning its business, the value of Mullen (MULN) stock has declined by 94.3% thus far in 2022.

However, in recent days, the share price has managed to regain some of its steep losses, hitting an intraday high of $0.32 on 14 November, from $0.26 on 8 November.

Back in January, Mullen promised that it will start delivering its electric-powered vans during the second quarter and the Mullen FIVE SUV by the end of the third quarter of this year. However, those delivery dates have been pushed to next year.

These developments appear to have prompted a surge in MULN short interest in late October.

In this article, we share further details about this electric vehicle (EV) business and discuss the odds of a MULN short squeeze happening as a result of this latest spike in Mullen short interest.

What is Mullen Automotive (MULN)?

Mullen Automotive is a California-based EV manufacturer. The company was spun off from its parent Mullen Technologies in 2021 and has operated as a standalone business since then.

Mullen is a pre-revenue startup as it is still in the process of launching its two first fully functional vehicles – an SUV called the Mullen FIVE and a delivery van called the Mullen ONE. Both of these models are expected to be available at some point in 2023.

According to the latest financial report published by Mullen, the company produced a net loss of nearly $60m during the three months ended 30 June. Meanwhile, during the first three quarters of the 2022 fiscal year, Mullen lost $128.5m. 

Mullen Automotive went public officially as a standalone company in November 2021 as a result of a reverse merger with an entity called Net Element. Back then, the stock started trading on the Nasdaq stock exchange under the ticker symbol ‘MULN’.

Mullen short interest rises sharply in late October

According to data from MarketBeat, the Mullen short interest has been increasing since mid-September, moving from 11.4% back then to as much as 34.2% by the end of October. This percentage corresponds to a total of 139.14 million common shares of Mullen Automotive that were being borrowed by short sellers by the end of last month.

In early September, the company announced the acquisition of Bollinger Motors, a company that manufactures all-electric platforms and chassis cabs for commercial vehicles. According to the official press release, Mullen will pay $148.2m for a 60% controlling interest in Bollinger in a cash-and-stock deal. The pressure that this deal puts on the already weak finances of Mullen Automotive may be the reason why short sellers have been increasing their bets against the company.

According to Mullen’s latest financial update covering the third quarter of the year, the company had $99m in cash and equivalents. During the nine months ended on 30 June, the company burned more than $50m of its liquid reserves.

In the meantime, in October, Mullen acquired bankrupt Electric Last Mile Solutions, another US commercial electric vehicle maker, in an all cash purchase for $240m . The purchase is expected to accelerate the launch of the Mullen FIVE and Bollinger B1 and B2 retail vehicles.

For market participants, Mullen’s risk of insolvency is possibly considered high as its cash reserves are limited and the company is still quite far from being able to generate any revenues as its timeline for delivering its first vehicles has been pushed to mid/late 2023.

Is a MULN short squeeze possible?

With the Mullen short interest standing above a third of the stock’s float, the stage is set for a short squeeze if an unexpected event such as positive company-specific news or relevant changes to the macroeconomic backdrop suddenly produce a spike in the price of MULN stock.

However, a high short interest is not necessarily indicative that a Mullen short squeeze will happen as a catalyst is still needed. The firm’s financial situation and its inability to produce revenues for an uncertain amount of time are justifying, to some extent, both the latest drop in the stock price and short sellers interest in MULN stock.

Moreover, the days to cover metric, which indicates how many days it will take short sellers to cover their positions based on the stock’s average daily trading volumes, stood at 1 by the end of October. 

With a ratio this low, short sellers may not struggle at all to find enough exit liquidity for their open positions and that reduces the odds of a Mullen short squeeze.

Final thoughts on MULN short squeeze 

Fiona Cincotta, senior market analyst at City Index, said in a note to Capital.com: "EV stocks are gaining interest from retail investors who are optimistic regarding the outlook for cleaner cars, although demand is significantly more robust among larger industry players."

"Technically, there isn’t anything encouraging about Mullen’s share price action. The share price has broadly traded below its 50-day moving average since mid-April. The price has shown few signs of staging a meaningful recovery. Even last month’s rally was short-lived and capped at 0.61," she added.

MarketBeat’s Thomas Hughes wrote on 7 November: “The risk for investors is that the production of vehicles is still about a year away and that will weigh on prices regardless of the news.”

“Once production begins, however, this stock could easily move up into the high-single-digit-dollar range.”

Note that analysts’ forecasts and views on the stock squeeze can be wrong. You shouldn’t use them as a substitute for your own research. Always conduct your own due diligence before trading, looking at the latest news, a wide range of commentary, technical and fundamental analysis. 

Note that past performance does not guarantee future returns. And never trade money you cannot afford to lose. 

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