Mullen Automotive Inc (MULN)

[I-Glow]

"Mullen Misery

The value of the EV maker has collapsed as the volume of shares outstanding ballooned by almost 70,000%

Mullen has survived by issuing stupefying volumes of stock (plus warrants to acquire even more shares) to a handful of professional investors such as Acuitas Capital LLC and Esousa Holdings LLC. Those investors are then able to flip most of their holdings to the company’s retail investors for a quick and sizeable profit.

At the start of 2022, Mullen had around 23 million shares outstanding, or less than 1 million when adjusted for a 1-for-25 reverse share split in May of this year. Today, there are more than 640 million Mullen shares.

The dilution won’t end there. Soon there could be almost 3 billion shares outstanding, if you add those registered in this filing for the company’s latest $100 million capital call. Of the roughly 2.3 billion of potential share issuance, Esousa and Acuitas are entitled to sell more than 850 million each.

In return for this massive dilution, Mullen has raised a total of only a few hundred million dollars of capital since last year. As of this month, the company held around $235 million of cash, which it says is equivalent to two years of operating capital. Yet that sum won’t go far in the capital-intensive automotive business. (Rivian Automotive Inc. had around $11 billion of cash at the end of March, for example.)

It is hard to keep track of Mullen’s complex financing, but the risks are spelled out plainly enough in financial filings. Its latest prospectus warns the financing “has the potential to cause significant downward pressure” on the share price and may result in an overhang whereby lots of shares become available for sale or there is a perception that certain holders intend to sell their shares.

Ordinary investors have been crushed, but Mullen Chief Executive Officer David Michery hasn’t suffered as much. For every $100 million of equity or debt financing he raises, he is awarded 1% of the shares then outstanding, according to his compensation arrangements outlined here.

Michery is skinning investors - he does care about building a business he only cares about enriching himself.

IG