Automakers Display New Models At The Los Angeles Auto Show
Mario Tama
Mullen’s Financials
Mullen ended Q2 FY23 with no revenues, a loss from operations of around $70 million, and a net loss of $117 million. Additionally, it currently only has around $7 million in debt that will mature over the next twelve months, which it should have no problem paying with its current liquidity.
Raising Future Capital
If Mullen decides to raise capital in the next two years, which I believe it will do, it will face the problem of staying compliant with Nasdaq’s listing requirements. This is due to its stock currently trading just below the $1 mark, and any dilution will surely add pressure on its stock price to the downside.
In that case, Mullen faces the risk of being delisted since if it can’t maintain a bid price of at least $1, it can’t effect a third reverse split since its cumulative reverse split ratio is 225 to 1, and according to NASDAQ listing requirements, its cumulative ratio mustn’t exceed 250 to 1. So, if its cumulative ratio exceeded 250 to 1 and the bid price fell below $1, the company would receive a delisting determination and would be at risk of being delisted. This means that the company’s future will depend on whether it can maintain its bid price above $1 without resorting to a reverse split for the next 2 years, which may not be realistic given its need to raise capital.
Conclusion
Despite increasing its liquidity to $235 million, Mullen is still at risk of running out of cash earlier than management expects, which may lead it to go bankrupt. This is mainly due to its ability to raise capital being limited, since it would risk being delisted for not meeting Nasdaq’s $1 minimum bid price requirement. Not only that, but Mullen is yet to show enough demand for its vehicles to convince me that it is a serious contender in the EV space. For these reasons, I’m giving Mullen a Sell rating. $Mullen Automotive(MULN)$
SOURCE: SEEKINGALPHA
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