Mullen Automotive Inc. (NASDAQ: MULN), a company that makes electric cars, is up 70 percent in the premarket despite no news on Tuesday to have triggered such an impressive rally.
Today, neither the Wall Street analyst nor the Securities and Exchange Commission filed a report in Mullen’s favor.
Mullen’s stock is up a staggering 80% in just one week.
Mullen Stock could also reduce gains.
While investors in Mullen stocks, for example, made huge profits within the last 48 hours, holding the EV stock over the long-term is a very risky endeavor.
The Nasdaq-listed company is still far from financial stability. The company continues to lose cash each month, and it has a long history of diluting existing shareholders.
Mullen Automotive also continues to have difficulty meeting its production targets, and its scaling operations raises doubts about the company’s ability to meet its commitments.
It’s also not as if Mullen stocks pay a dividend in order to reward loyalty.
Insiders of the MULN seem to have lost their conviction
In 2025, it will be increasingly difficult for Mullen Automotive due to the increased competition of larger competitors like Tesla and Rivian.
The future of Mullen Stock is not rosy, as Donald Trump could choose to revoke at least certain parts of the Inflation Reduction Act which offered incentives to EV Manufacturers.
Ignacio Novoa is one of MULN’s directors and he sold about $114,000 of MULN stock just a few days ago. This suggests that even the insiders are losing confidence in MULN.
Wall Street analysts do not cover Mullen because they believe it is too unprofitable or risky.
Mullen faces the threat of bankruptcy
The rising costs of materials such as lithium, nickel and copper also pose a significant challenge to the Mullen Automotive, which is already struggling with cash.
Electric vehicles ended the latest quarter reported with approximately $6.0 Million in short-term and cash investments. Mullen is at a high risk of going bankrupt.
The rally in the Mullen share price this morning was not very exciting, as it is a penny-stock. It’s possible that traders are manipulating the share price of Mullen today to gain a profit.
Mullen Automotive is a risky investment because of its financial instability, manufacturing challenges and fierce market competition.
Investors should approach MULN cautiously, given the ongoing cash burn as well as looming concerns about bankruptcy. Crispus Nyaga, our market analyst is also currently negative on Mullen.
The post Why did Mullen stocks surge 70% on Tuesday? This post may change as new information unfolds
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