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No matter how much good news it receives, Mullen Automotive (NASDAQ:MULN) stock just can’t rebound. The popular meme stock has shed almost 50% of its value over the past month, gradually bleeding itself dry while demand for electric vehicles (EVs) continues to rise.
Today, Mullen announced that it has received a new purchase order from Alabama-based NRTC Automation for three all-electric commercial Class 3 trucks. All three EVs are scheduled to be delivered in the final quarter of 2023. Despite this positive development, MULN stock is still trending downward today. This is in keeping with the company’s history of failing to generate positive momentum in the face of good news. The company is currently facing challenges that far outweigh any menial progress.
What’s Happening With MULN Stock
This morning began on a positive note, with MULN stock enjoying a slight rally. However, by the afternoon, it had begun slipping back into the red, erasing all gains. As of this writing, it is down about 8% for the day and is likely to continue trending downward. Despite last week’s momentum, this meme stock has proven that any pops it enjoys are superficial and do not signal actual growth.
Why isn’t today’s news pushing MULN stock up? The answer can be partially attributed to the fact that three vehicles is a small order. It’s true that it could lead to more purchases down the road. But for now, it’s hard to be optimistic about something so small. But what investors should really take from this is a reminder that, at its core, Mullen is an unstable meme stock. It has stayed relevant primarily due to retail investors, but the numbers don’t lie. Over the past two quarters, MULN stock has fallen almost 100%, plunging from $52 per share to its current price of 60 cents.
The r/WallStreetBets crowd has loyally stood by Mullen as its race to the bottom has accelerated. But as InvestorPlace contributor Faisal Humayun notes, the stock is unlikely to rebound, no matter what social media chatter claims. In his words:
“[If ] we understand the language of the markets, there is little confidence in the company’s management team. Cash burn will continue, and even as revenue increases, the company needs to dilute equity. At current levels, massive dilution would be needed to raise funds. It’s also strange that a buyback is initiated at a time when the company needs funding for growth projects.”
Why It Matters
The takeaway is that this is the end of the line for Mullen. Investors should be careful not to be fooled by quick meme stock surges that always end as quickly as they began. If a company can’t rise on a positive update, there’s no reason to believe it can hold its own in a competitive market full of larger, more stable firms.
Equally important to remember is the fact that MULN stock is dangerously close to being delisted from the Nasdaq. If the company can’t reach $1 per share and remain there for 10 consecutive days before Sept. 5, it will lose its spot on the exchange. The way it looks from here, there’s almost no way Mullen can avoid this grizzly fate. Once it begins trading on an over-the-counter (OTC) exchange, it will be the last straw.
On the date of publication, Samuel O’Brient did not hold (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.