Why Is Mullen Automotive (MULN) Stock Down 20% Today?

The Mullen Five vehicle is displayed at the 2021 LA Auto Show media day in Los Angeles, November, 18, 2021. MULN stock.


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One of the more volatile stocks in the market over the past month has been Mullen Automotive (NASDAQ:MULN), and today, it seems like short sellers may be playing a role. Indeed, today’s volatility is to the downside, with shares of MULN stock dropping more than 20% at the time of writing.

The Mullen Five vehicle is displayed at the 2021 LA Auto Show media day in Los Angeles, November, 18, 2021. MULN stock.

Source: Ringo Chiu / Shutterstock

However, it’s important to put this move in context. A month ago, MULN stock was trading below 70 cents per share. Subsequently, during a recent surge in battery-related stocks, MULN stock appreciated to more than $4 per share on Monday, providing investors with a return of more than 500% in approximately four weeks. Today’s decline follows similar declines throughout the week, which has brought MULN stock to the $2.40 level, or down approximately 40% from its weekly peak.

These moves indicate that investors are riding the momentum with this stock, both to the upside and the downside. Let’s dive into one of the key factors that could be behind these moves.

What’s Driving Volatility With MULN Stock?

Much of Mullen’s recent rise is tied to announced improvements with the company’s electric vehicle battery tech. Investors have a number of catalysts to rely on that suggest this company has a brighter future than its beaten-down valuation suggests.

However, it’s also clear that traders are viewing this stock as a unique two-sided vehicle to make money in the short term. Specifically, short interest with MULN stock is remarkably high, currently sitting at around 36%. This high level of short interest has created a situation where volatility could be the norm for some time.

That’s because bulls may view this level of short interest as a potential catalyst for a short squeeze. Short sellers may be emboldened by these numbers, suggesting their thesis is correct. In either case, this is clearly a polarizing stock. Accordingly, the wild swings we’ve seen of late may be expected.

Moving forward, I think MULN stock is likely to act more as a trading vehicle than an investment. Accordingly, investors may want to be cautious with this name right now.

On the date of publication, Chris MacDonald 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.

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