Mullen Automotive (NASDAQ:MULN) stock has experienced a significant decline in its stock price as they recently removed it from the Russell 2000 Index. The removal was because of the company’s failure to meet the price requirements set by FTSE Russell.
As a result, MULN stock has already been excluded from the index.
While stocks like MULN can offer the potential of extreme gains, they also come with considerable risk. Given the current market environment and the company’s challenges, let’s dig deeper why it may not be wise to invest in MULN.
The Constant Decline in MULN Stock
Mullen’s exclusion from the Russell 2000 index may lead to selling pressure on MULN shares. Despite having over $235 million in cash, the company’s market capitalization remains low at around $30 million. This cash reserve should support operations for the next two years.
Mullen’s CEO, David Michery, expressed confidence in the company’s financial position and commitment to delivering vehicles to customers by the end of 2023. Mullen emphasized its unencumbered real estate and assets, except for $7.3 million in debt.
They also announced a moratorium on new financings for the rest of the year and assured sufficient capital for the next 12 months. However, the cash value per share decreased from 68 cents to 38 cents between March 31 and June 13.
Mullen’s decline is primarily attributed to dilution concerns, which are expected to continue. The company recently announced a potential resale of up to 2.33 billion shares, adding to the already existing 643.37 million shares of common stock. If the resale is fully completed, it will further increase the number of shares outstanding.
Continuous Stock Splits Will Come
Mullen Automotive faced non-compliance with Nasdaq’s listing requirements due to its stock falling below the $1 minimum bid price threshold. To rectify this, the company implemented a reverse stock split, artificially raising the share price above $1 and ensuring compliance with Nasdaq’s listing requirements.
Mullen Automotive’s stock price has dropped significantly below $1, putting it at risk of delisting from the Nasdaq exchange and potential removal from the Russell 2000 Index. Despite their attempt to integrate artificial intelligence technology into their vehicles, it failed to generate substantial market enthusiasm. Another reverse stock split might be in Mullen Automotive’s future as a measure to avoid delisting.
What Now
Despite Mullen Automotive’s reverse share split and the release of an AI-focused press statement, the company’s investors are still struggling. While it’s important to consider the management’s perspective, making independent investment decisions is crucial. Personally, I remain unconvinced by Mullen Automotive’s optimistic outlook amidst its challenging financial situation. Consequently, I anticipate MULN stock to persist in its decline and advise against holding it in 2023.
On the date of publication, Chris MacDonald 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.