Bulls Vs Bears: Mullen Automotive Short Interest Grows

Key Points

• Mullen Automotive is falling back to support on rising short-interest. 
• The fundamental picture is improving and production is expected in late 2023. 
• The stock is forming a bottom and a short squeeze is possible. 

If you are wondering why Mullen Automotive’s share prices are in the tank after rising meteorically in October it is because of the short interest. The shorts were taken by surprise when the stock jumped from $0.20 to $0.60 but they were not sent packing. No, they do not believe in this stock's rapidly improving story and in fact increased their efforts to send it down to $0.0. The short interest in this stock jumped 200 basis points in the back half of October, rising from 15% as reported on October 15th to just over 17% at the end of the month. That’s a 13% increase in two weeks and on top of the 8% increase in the first half of the month. The takeaway is that bears are driving this stock lower despite its improving fundamental outlook and it is setting up for a major squeeze. 

Volume Hits Record High In Mullen Automotive 

Trading volume in Mullen Automotive hit the second-highest level on record in the month of October. Average daily volume more than doubled the average of the preceding 6 months and trading topped 3 billion shares for the month. That means this company changed hands 6 times in 30 days which is quite a lot of volume and could impact trading in the near term. More importantly, the spike in volume is coincident with a string of good news and a technical bottom in the stock that could result in another big jump in prices given the right catalyst. Looking at the chart of weekly prices, it looks like Mullen is putting in a news-driven bottom.

The bottoming started in early 2022 when the company made moves to bolster its balance sheet and then it was confirmed in October when the company began to execute an aggressive strategy to improve operations. News driving the move includes the majority position in Bollinger Motors and solidified its positioning in the delivery vehicle market. That news was compounded by the acquisition of Electric Last Mile Solution’s assets and intellectual property which more than doubled production capacity and accelerated the timeline to begin production of key vehicles. Other news driving the stock is the hiring of former GM exec John Schwegman to take over the role of Chief Commercial Officer, exclusive rights to market the I-Go in Europe, and the cancellation of debt. 

The Sell-Side Gets Interested In Mullen Automotive 

The analysts have yet to put their 2-cents into the mix but the institutions have spoken. While institutional ownership is still very low at only 6.5% and activity is minimal the bulls are overwhelming the bears by very wide margins. The bulls have bought more than $10.6 million worth of the stock over the last year while the bears have sold only $0.50 million. Notably, the activity was strongest in Q1 of 2022, the quarter in which the highest volume in the stock was recorded, which suggests the institutions may help this stock to bottom and get turned around. A few of the names listed as owners include Goldman Sachs, State Street, Millennium Management, Vanguard Group, Bank of America and Blackrock which are all top-tier advisors with billions of investment dollars at their disposal. 

The Technical Outlook: Mullen Automotive Needs A New Catalyst

The price action in Mullen Automotive has almost retraced the October pop and looks ready to move higher again. The indicators suggest these low levels are overextended and oversold so all the market needs is another reason to start buying and it could come any day. The risk for investors is that the production of vehicles is still about a year away and that will weigh on prices regardless of the news. Once production begins, however, this stock could easily move up into the high-single-digit-dollar range.