Keep an Eye on Mullen Automotive as Short Interest Creeps Up

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• Mullen Automotive (MULN) stock came to the attention of Redditors this year, which led to a short squeeze
• There is a high chance another squeeze could be around the corner due to increasing short interest
• MULN stock may be unable to handle a high volume of convertible debt and high cash burn in the long run

Source: Ringo Chiu / Shutterstock.com

Mullen Automotive (NASDAQ:MULN) has created electric vehicles (EVs) for two decades. However, it hasn’t attracted the same headlines as Tesla (NASDAQ:TSLA) or NIO (NYSE:NIO). Recently, though, MULN stock made waves in the industry when, from a low of 52 cents, it shot up 477% to $3 per share.

You can chalk that up to strong interest from retail investors. It is one of the most mentioned tickers on Reddit’s r/WallStreetBets and was subject to a short squeeze, leading to a substantial increase in its price momentum.

In addition, the stock shot up more than 20% after reports emerged about its Mullen Five, an electric crossover. The company made solid progress on battery technology and expects the car to go into production in the fourth quarter of 2023, with deliveries in Q2 2024.

Therefore, you have the recipe for an ideal meme stock.

However, the larger issue is whether you should trim your holdings or keep the stock. Considering the short interest is still high and it’s still heavily discussed on retail trader forums, you cannot exit your position right now.

MULN Stock Is Still a Target for Meme Investors

Currently, 25.36% of MULN’s available shares were sold short and not yet covered. Short interest of 10% or lower shows a strong, positive sentiment. Higher short interest indicates a significant amount of bearish sentiment.

A high short interest ratio has been a strong indicator that meme stock investors will be interested. Plus, according to the data, the short interest is moving up. At the same time, MULN stock is in the top 20 stocks currently being discussed on Reddit.

Electric vehicles are also a prime topic of concern on the platform. Analysts at Charles Schwab have revealed that almost 50% of investors are millennials, and 16% are in Generation Z. According to a Pew Research Center study, these generations are more likely to engage in climate change activism. That sentiment correlates with the companies that get retail investor interest.

Mullen 5 Will Start Making a Dent

The company’s latest addition to its lineup is the Mullen 5, which offers a 325-mile range per charge and accelerates from 0 miles per hour (mph) to 60 mph in 3.2 seconds.

The price point is $55,000 before the federal tax credit, allowing it to compete with other mid-market mainstream EVs. By offering a few different packages with a range of costs, any customer should be able to find an option that suits them.

There is also significant interest in the car because of its solid-state battery technology. These batteries offer faster charging times and superior driving range compared to lithium-ion batteries. They can solve issues that currently hinder the long-term adoption of EVs.

As reported by InvestorPlace contributor Joel Baglole, the company says its solid-state battery can power electric vehicles for up to 600 miles with one full charge. This means it can recharge to 50% and run up to 300 miles of driving range in less than 18 minutes.

However, Mullen is a pre-revenue business and has taken on a lot of convertible debt to fund its operations. This might not be the right long-term investment for many people.

The Long-Term for MULN Stock Is Uncertain

Mullen is an interesting EV company with a long history of mergers and acquisitions. However, it has taken on a lot of debt to finance its operations and is burning through cash.

It will be a couple of years before deliveries for its product commences. It will then start earning revenues. In the meantime, MULN makes sense for a short-term trader since it ticks all the boxes to be a prime meme stock.

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On the publication date, Faizan Farooque 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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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