Mullen Automotive: Unveiling The Truth Behind EV Promises

●  Mullen Automotive debuted on Nasdaq in November 2021 after merging with Net Element.

●  The company promised a luxury sports car, the Dragonfly K50, but fell short due to issues with its partnership with Qiantu Motors.

●  Mullen also failed to launch its fully electric luxury SUV, the MX-05.

●  Despite many press releases about progress in EV production and battery advancements, Mullen missed its commercialization goals and struggled to monetize its technologies.

●  Mullen stock reached a high of around $13 soon after its IPO but lost more than 90% of its value by March 2022 as investors realized the company was poised to doom.

●  In August 2022, shareholders sued the company, claiming it hid problems with key partners and overstated the results of battery tests.

●  Mullen has agreed to a $7.25 million settlement with shareholders to resolve the lawsuit. Affected investors can now file a claim to receive their payment.

Overview

Despite a promising market debut, Mullen Automotive Inc. MULN has failed to achieve any meaningful financial success so far. The company's optimistic announcements about the upcoming launch of the Dragonfly K50 supercar and its unique battery technology initially fueled a surge in stock prices in late 2021. However, by February 2022, the stock had plummeted by more than 90% from its November peak. This decline prompted investors to sue Mullen, accusing the company of providing inaccurate production timelines and exaggerating its ability to launch electric vehicles. In April 2022, a report from Hindenburg Research supported these allegations. Last month, Mullen settled the lawsuit by agreeing to pay $7.25 million to investors.

Background

On June 15, 2020, Mullen announced plans to go public by merging with Net Element. The merger was completed, and Mullen began trading on Nasdaq on November 5, 2021. At the time, Mullen highlighted the upcoming launch of the Dragonfly K50 supercar with Qiantu Motors and the MX-05 midsize SUV by the end of 2021. The company also claimed its batteries were non-flammable, puncture-proof, and could maintain full capacity for over 500,000 charging cycles.

In December 2020, Mullen shared that it had started building a pilot production line and was accepting reservations for the MX-05 SUV. The company planned to begin mass production in 2022, aiming to produce 1,000 vehicles annually.

Then, in March 2021, Mullen announced it had acquired the Advanced Manufacturing and Engineering Center (AMEC) based in Tunica, Mississippi, without any existing debt. Mullen stated that it is planning to utilize the facility to manufacture electric cargo vans (Class 1 and Class 2), and Mullen FIVE electric crossover vehicles. This acquisition was seen as a significant move to enhance Mullen’s production capacity. Commenting on the importance of this deal, Mullen's VP of Manufacturing John Taylor said:

"The opportunities for this site are endless when it comes to validating both engineering and manufacturing initiatives. Such a huge step forward in advancing our technology and getting it into the customers’ hands."

Boosting investor confidence, Mullen CEO David Michery claimed that this investment would help the company emerge as a one-of-a-kind EV player with a focus on domestic manufacturing.

"Our goal is to sustain 100% of our manufacturing processes in the US and by US workers. With the establishment of AMEC in Tunica, we are among the very few EV companies that have a manufacturing presence in the US."

Mullen issued a press release in February 2022, just months before the lawsuit, outlining its progress in solid-state battery technology. CEO David Michery highlighted that tests showed the battery could deliver over 600 miles of range on a single charge in the Mullen FIVE, positioning the company as a leading contender in EV battery development.

Mullen actively promoted its solid-state battery technology and enhanced its brand presence through social media. The company was featured on Yahoo Finance Live as an emerging EV stock, thanks to its advanced battery technology and promising future. 

Hindenburg Research Deals A Deadly Blow

In a report titled "Mullen Automotive: Yet Another Fast-Talking EV Hustle,” Hindenburg Research claimed Mullen was just another EV company making big promises without much to back them up. The report pointed to several issues, including inflated technology claims, misleading battery announcements, rebranded Chinese EVs, false purchase orders, misrepresented partnerships, questionable manufacturing facilities, the use of stock photos in promotional materials, and controversies involving the CEO. 

In 2019, Mullen partnered with Chinese automaker Qiantu Motors to rebrand its DragonFly supercar. However, after defaulting on payments, the agreement was canceled in October of that year. Despite this, Mullen continued accepting vehicle reservations into 2022. Hindenburg found that Mullen was simply rebranding Chinese EVs by putting a sticker on them. Import records also confirmed that two vehicles were brought into the country from China by the company.  Mullen also did not possess EPA certificates, which are essential for selling automobiles in the United States and had not made critical staff recruitments for its Mississippi plant, suggesting possible setbacks in production.

In 2020, Mullen claimed to be advancing its solid-state battery technology through a joint venture, but Hindenburg's investigation found no evidence of this. 

Hindenburg Research also raised serious concerns about Mullen's leadership and key shareholders. CEO David Michery had a poor track record, with five failed companies and two securities registrations revoked. His background in entertainment, rather than the automotive or engineering sectors, fueled doubts about his ability to lead Mullen. Major shareholders also had questionable histories. Terren Peizer, who held 29% voting power, had a pattern of investing in companies that surged and crashed. Adding to the list, Michael Wachs, the third largest shareholder at the time, was convicted of bank fraud in 1997. 

The Downfall Begins

After Hindenburg’s short report, Mullen’s stock dropped 10%, marking the start of a challenging period for the company.

In June 2022, shareholders filed a complaint claiming that Mullen’s leadership made misleading statements, particularly regarding its partnerships, especially with Qiantu, and overstated its technological advancements.

Since its IPO, Mullen has faced financial difficulties, reporting nearly $1 billion in losses in 2023 on just $400,000 in revenue. The company continues to burn cash at around $50 million per quarter and has diluted existing investors’ shares by aggressively issuing new ones. From an operational perspective, Mullen has failed to even get close to its estimates for EV sales.

Resolving The Case

To settle the lawsuit filed by investors, Mullen Automotive agreed to a settlement with the affected investors on August 14, 2024. The total cash settlement amount is up to $7.25 million. If you invested in Mullen Automotive, you may be eligible to file for a portion of the settlement to recover your losses.

Mullen Automotive's fall highlights the substantial risks involved in investing in unproven businesses that promise to make it big in the long run based on their exposure to fast-growing business segments. These promises often involve betting on trendy market themes, which is exactly what happened with Mullen as the company promised to make it big as a unique EV player.