Mullen Automotive Stock Forecast: MULN trying to find footing above $0.20

UPDATE: Mullen stock dropped another 5.3% at Thursday's regular session open to trade at a new, split-adjusted all-time low of $0.2130, and seems to have gained some support above the round $0.20 mark.

Another day, another sell-off for Mullen Automotive (MULN). CEO David Michery and company continue to dilute the burgeoning electric vehicle (EV) upstart at a record pace, which is causing the MULN share price to dwindle. MULN stock is now down 79.9% since the 1-for-25 reverse stock split that took place just a little over one month ago on May 4.

MULN stock lost 33% in just 24 hours on Wednesday. First, Mullen shares dropped 30% in the regular session on Wednesday, which was followed by another 6.3% fall afterhours. Altogether, the MULN stock price dropped from $0.3215, the closing price on Tuesday, to $0.2109 by the end of Wednesday's post-market session.

Mullen Automotive stock news: Another boatload of dilution

Following the Acuitas Capital deal in early June that allowed Mullen common stock to be diluted as much as 36%, give or take since much of it was in warrants, management at the development-stage automaker issued a new filing with regulators on Monday to issue nearly 586 million in new common stock shares.

Dated June 12, the filing with the Securities & Exchange Commission (SEC) is a prospectus supplement that details Mullen registering 585,937,467 of new shares of common stock for resale. 

A number of individuals and entities who were issued warrants in the past have now been exchanging those warrants for common stock and immediately selling them. None of the proceeds of these sales go to Mullen. These seller entities include Esoussa Holdings, Michael Wachs 2022 Dynasty Trust, Acuitas Capital, Micael Friedlander, Jess Mogul, Jim Fallon, Davis-Rice Pty Limited and Ault Lending.

For color, Mullen’s filing reads: “As of June 7, 2023, we had outstanding 243,567,602 shares of Common Stock. As of that same date, we also had outstanding 1,037 shares of Series A Preferred Stock convertible into an aggregate of 4,148 shares of Common Stock, 1,210,056 shares of Series C Preferred Stock convertible into an aggregate of 14,523 shares of Common Stock and 363,097 shares of Series D Preferred Stock convertible into an aggregate of 48,402 shares of Common Stock. The issuance of shares of Common Stock upon the conversion of such shares of preferred stock would dilute the percentage ownership interest of holders of our Common Stock, dilute the book value per share of our Common Stock and increase the number of our publicly traded shares, which could depress the market price of our Common Stock.”

At least they are aware! Mullen’s current agreement with its board allows for the creation of up to 5 billion shares of common stock and 500 million preferred shares.

Mullen stock news: Another reverse stock split headed for shareholder vote

Mullen also announced that it will schedule its shareholder meeting for August 3. At the meeting, management said it will bring up for a vote the need to effect another reverse stock split. This is because the NASDAQ exchange requires companies to maintain a share price above $1. 

The separate SEC filing says Mullen will enact a reverse split between a 1-for-2 and a 1-for-10 structure. The reverse split on May 4 was 1-for-25, pushing the share price from around $0.064 to $1.60. The share price dropped below $1 before the calendar had even switched to June however.

The shareholder event will also allow voting on switching from a Delaware Corporation to a Maryland Corporation, issuing another $30 million in common stock and approving 52 million in new shares for incentive pay.

Mullen stock forecast

While the rest of the market is booming due to the lower May Consumer Price Index (CPI) data reported on Tuesday and Wednesday’s expectation for a Fed rate pause, Mullen stock should continue to fall. The heavy amount of constant dilution required for Mullen to ramp up to a profitable business is large.

The Relative Strength Index (RSI) is highly oversold, but in this case that is not a bullish signal. Mullen will likely lose more than 50% of its per share value before the next reverse split is enacted in August, and then shareholders should expect to continue being diluted after that. 

MULN daily chart