MULN - MULN stock price: Can Mullen sustain its share buyback?
2023-08-17 20:02:00 ET
Mullen Automotive ( NASDAQ: MULN ) stock price sell-off intensified even as the company started its share buyback program. The shares plunged by more than 19% on Thursday and hit its all-time low of $0.79, giving it a market cap of over $56 million.
Mullen share repurchase program
Mullen Automotive share price sell-off gained steam after the company started implementing a $25 million repurchase program. Share buybacks are often seen as being positive for companies since they reduce their outstanding shares and boost the earnings per share (EPS).
Mullen’s case is different and analysts believe that the company is attempting to manipulate its stock. For one, in most cases, companies use their excess cash or profits to repurchase shares and pay dividends.
Mullen does not have the resources to either pay a dividend or repurchase its stock. The most recent report showed that the company had over $89 million in cash and short-term investments. These funds had dropped from over $107 million in the previous quarter.
While Mullen’s cash is higher than its market cap, the reality is that the company is incinerating more money than that. Data by SeekingAlpha shows that Mullen’s loss was $44 million in 2021 followed by $740 million in 2022 and $1 billion in the trailing twelve months (TTM).
Mullen Automotive has already started manufacturing and delivering its vehicles. But history suggests that electric vehicle companies take a longer time before turning profitable. Well-known brands like Rivian, Lucid, and Polestar are yet to turn a profit.
Therefore, the market believes that Mullen’s buyback is not genuine for a company that is struggling to comply with its NASDAQ listing. It did a big reverse split in May and is now considering doing another one.
MULN stock price forecast
Regular readers know that I have been critical of Mullen Automotive for a long time. I started warning about its bankruptcy risks in 2022 as you can see here and here . While the company is yet to file for bankruptcy, its stock has plunged by more than 98% this year.
On the daily chart, we see that the stock has moved in a horizontal pattern in the past few months and is nearing zero. The Average True Range (ATR), has also flattened, signaling that the company’s volatility has flattened. Also, the shares remains below all moving averages.
Therefore, the outlook for Mullen Automotive share price is still bearish despite the share repurchase program.
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