Source: Ringo Chiu / Shutterstock.com
The latest press release from a law firm investigating whether Mullen Automotive (NASDAQ:MULN) violated federal securities laws hit the newswires on April 10. That’s not good news for MULN stock, which had been a real momentum play until Hindenburg Research’s April 6 report torpedoed the company’s push back towards $6. MULN stock now sits around $2.50.
If you’re thinking about buying shares in the solid-state battery technology company, you might want to think twice. Where there’s smoke, there’s fire. Often, reports produced by shorts like Hindenburg don’t affect a company’s share price. However, this one looks to be different.
The prudent investor would be wise to wait for this situation to play out before committing your hard-earned capital fully.
On March 25, I argued that Mullen appeared to be nothing but smoke and mirrors.
That was before Hindenburg’s report, which made several allegations about the company’s claims, including one where the company said it had a joint venture with a Ukrainian company to bring a solid-state battery to the U.S. under license. This joint venture was supposed to have been entered into in January 2020. The Ukrainian company, NextMetals, says that never happened.
I suggest at the very least that investors read the Hindenburg report. They, too, believe the company is nothing more than smoke and mirrors. The Hindenburg’s report states:
We suspect that Mullen is once again attempting to borrow credibility from others in order to make grandiose claims to investors, pitching aggressive short-term timelines that bear little resemblance to reality
Pay Peanuts, Get Monkeys With MULN Stock
Let’s forget Hindenburg’s allegations of false claims by the company for a moment and focus on the report’s statement that Mullen spent just $3.1 million in research and development in 2021. That’s a measly sum for technology that will supposedly be ready for commercialization in 18 – 24 months.
Quantumscape (NYSE:QS), the developer of solid-state lithium metal batteries, spent $151.5 million on R&D in 2021. Over the past three years, it’s spent $263 million getting its technology ready for commercial application.
You don’t have to be a genius to know that battery technology requires deep pockets, substantial R&D investments, and significant financial losses for several years on the pathway to profitability.
As more potential legal troubles ensue, Mullen stock seems unlikely to come out of this unscathed. But, as I stated earlier, where there’s smoke, there’s fire. As a result, MULN stock is struggling for good reason.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Will Ashworth 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.