Source: Ringo Chiu/Shutterstock
A struggling electric vehicle (EV) startup is looking to acquire another that’s struggling even more. Mullen Automotive (NASDAQ:MULN) hasn’t seen any real momentum in months despite its recent acquisitions and partnerships. Many pundits remain bearish on MULN shares, leaning in favor of its biggest competitors that are actually putting electric vehicles on the road. But Mullen made it clear he wasn’t giving up. Today he announced an offer to acquire a competitor, which has fallen even more in the past six months than Mullen himself. This is likely because the company in question declared bankruptcy in June 2022.
Last mile electrical solutions (OTCMKTS:ELM) has lost nearly 100% of its value since March 2022. Its name would have easily been forgotten by Wall Street long ago. But it turns out that ELMS went bankrupt just when Revlon’s (NYSE:ROUND) bankrupt company status led to a massive short squeeze. ELMS jumped 180% as investors speculated it could be the next bankruptcy squeeze play. But as quickly as it rose, ELMS stock plunged back into the red. Since then, it has experienced no growth. So what does Mullen want with the company? Let’s take a closer look.
What this means for MULN stock
Mullen is a company that has no trouble staying in the public eye but still can’t generate real growth. It’s not because of the company’s lack of effort. Mullen started the month by announcing that it would introduce water-from-air solutions into its electric vehicles. This partnership with Watergen did not, however, help to increase the shares, nor did Mullen’s purchase of a majority stake in Bollinger Engines. Although MULN shares are up on today’s news, that doesn’t necessarily mean the pending deal will help turn the company around.
It is important for investors to note that the transaction in question is not finalized. Although Mullen has shown interest, he has more than two weeks left to bid. As Bloomberg reports:
Mullen accepted an offer of “nearly $100 million in full consideration,” according to a Sept. 16 filing by the trustee in the Electric Last Mile Chapter 7 case. Competing bids are due by October 3 and an auction will take place on October 7.
According Tech Crunch, Mullen is currently the highest bidder for Electric Last Mile Solutions. The outlet reports that he put down a $5.5 million deposit “to be applied toward purchase.” Assuming Mullen does not outbid, the possible purchase will be $55 million and will include ELMS’s inventory and intellectual property rights as well as the company’s plant in Mishawaka, Indiana. But that will also include Mullen taking on a liability of $37 million.
Mullen’s last mile solution?
It’s encouraging to see Mullen making a play to increase his production capacity. But that doesn’t change the fact that acquiring a struggling company like ELMS won’t signal the kind of turnaround investors want to see. MULN shares have risen and fallen too many times for investors to have any real confidence in the company.
Until Mullen starts putting true electric vehicles on the road, stock won’t really get much attention. And like InvestorPlace‘ notes Louis Navellier, even this may not be enough to demonstrate real growth. As he notes:
Even then, that may not be enough to get it going again in the right direction. Further dilution of ownership seems very likely, given that the mass production of vehicles is capital-intensive.
If you’re optimistic about the continued rise of electric vehicles, there are better opportunities.
At the date of publication, Samuel O’Brient held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.