Mullen Automotive Stock In Reverse Gear On 1-For-60 Reverse Split Plan: Retail Sentiment Mixed

Mullen Automotive shares slid on Friday morning after plunging over 26% in the previous session, as investors responded negatively to the EV maker’s 1-for-60 reverse stock split announcement. 

The move aims to help Mullen regain compliance with Nasdaq’s $1 minimum bid price rule. The split will take effect on Feb. 18.

On Stocktwits, Mullen’s sentiment meter shifted to ‘neutral’ from ‘bullish’ amid increased message volume. 

Bearish posts pointed to reports of a legal setback: Mullen lost a lawsuit against GEM Group, which it had accused of unregistered securities dealing and market manipulation. 

A court filing confirmed the ruling against Mullen, ordering the company to pay over $26 million in damages plus interest within 90 days — a sum that bearish retail traders noted far exceeds the EV maker’s current market capitalization and annual revenue.

Mullen only recently moved from pre-revenue development to commercial EV sales, reporting $400,000 in revenue for fiscal 2023 and about $1.1 million in fiscal 2024. 

However, its net loss for the twelve months ended Sept. 30, 2024, widened as non-cash impairment charges climbed to $119.2 million from $84.6 million the prior year. 

The company cited ongoing funding challenges and a sharp decline in its market cap as key drivers of the charge.

Cash and equivalents dropped to $10.3 million from $155.3 million a year earlier, while total debt stood just below $20 million.

Still, some bullish traders speculated that Mullen’s upcoming quarterly earnings report could trigger a rebound, suggesting the reverse split was strategically timed ahead of the release. 

The company has also seen some recent positive developments, including last month’s purchase of battery line equipment from Nikola for its Fullerton facility and new orders for its electric cargo vans from universities in Los Angeles and the San Francisco Bay Area.

Earlier this year, Mullen reported better-than-expected road testing results for its solid-state batteries, showing promising gains in driving range. 

Founded in 2014, the company initially sought to revive a defunct EV model before pivoting to develop its vehicles. 

After a 2020 merger, Mullen acquired a majority stake in Bollinger Motors in 2023 and bought assets from bankrupt Electric Last Mile Solutions.

Despite these efforts, investors remain cautious as Mullen navigates legal hurdles and financial strain. 

The stock has lost over 99% of its value in the past year, with the upcoming earnings report on Feb. 17 seen as a key test for the company’s growth narrative.

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