If you are wondering why Mullen Automotive's (NASDAQ: MULN) share prices jumped more than 50% in one day the answer is simple. The company closed on the purchase of Electric Last Mile Solutions, a bankrupt EV player with a focus on final-mile delivery vehicles. Not that exciting, at least at face value, but when you dig into the details one thing is clear. Mullen Automotive has seriously accelerated its plans while reducing the cost of expansion and expanding its capacity. What it boils down to is a massive win for the company that was slated to begin production of its flagship line in 2024. Now, plans have been accelerated by as much as a year which means it may begin producing the FIVE-series of SUV crossovers sometime in 2023.
What Is Mullen Automotive And What Did It Buy?
Mullen Automotive is the result of a merger between Mullen Automotive and Coda Automotive. The company came to life in 2014 although both leading entities had been around for quite a while. Today, the company is working hard to bring not only its FIVE series of vehicles to the market but to also advance solid-state battery technology. The company is among the best-positioned small operators in regard to the new science and has made some great strides with it. While the solid-state (lithium-sulfur, among others) battery situation is still years from commercial viability it promises to make EVs lighter, cheaper to build and give them twice the range.
Mullen Automotive, while not immune to the hype, was quietly biding its time during the EV boom and bust of 2020 but it shifted into gear earlier in 2022 and now aggressively moving on its strategy. The company made its first acquisition in early September when it bought a 60% stake in Bollinger Motors. Bollinger Motors is focused on final-mile delivery solutions and was purchased in a cash and stock deal worth $148.2 million. It has a line of class 1 through class 6 delivery vehicles that should begin production in 2023 with that production now scheduled for Mullen Automotive's original manufacturing plant in Tunica, Mississippi. That plant has been used in the past to produce H2 Hummers as well as Mercedez R-Class vehicles so is well-suited to the task.
The new purchase of Electric Last Mile Solutions, which was purchased in bankruptcy court for only $92 million, includes intellectual property, inventory, and a production plant in Mishawaka, Indiana. This plant can produce 50,000 vehicles annually and effectively adds 50% capacity for the commercial line of vehicles and more than doubles the company’s capacity to produce retail vehicles which is not a bad deal at all. In this light, even if Mullen Automotive struggles to produce cars it is building a healthy portfolio of assets that will be worth something to another EV manufacturer.
The Technical Outlook: Mullen Automotive Hits An All-TIme Low
Shares of Mullen Automotive hit an all-time low just a day before it announced the purchase of Electric Last Mile Solutions but the situation has a much different look today. The purchase sparked a 50% increase in share prices that was followed up by another 15% gain after-hours trading that suggests this stock is going to go higher. The move is aided by a relatively high 10% short interest that may be running scared. The risk now is that Mullen Automotive has still not produced any cars although it appears to be well on track. Assuming the company can continue on the path that it has set for itself, production of several vehicles should begin in mid(?) 2023 with deliveries beginning later that year or in early 2024. If this comes to pass, this penny stock will surely see its price move back into the dollar range.