In a surprising turn of events, shares of Mullen Automotive (NASDAQ:MULN) are on an incredible upswing, with gains of over 25%, despite a lack of immediate company-specific news.
Investors and market enthusiasts are left pondering the reasons behind this remarkable surge, especially considering that MULN had closed lower by approximately 10% just the previous day following an intriguing update related to its ongoing lawsuit.
Let’s dive into the possible catalysts behind this sudden rise in MULN stock.
The Legal Maneuvers: An Unusual Twist
Yesterday, Mullen Automotive disclosed fresh court-provided deadlines pertaining to its ongoing lawsuit against various broker-dealers, who are accused of manipulating the MULN stock market.
According to the latest developments, Mullen has until November 30 to submit an updated complaint, while all parties involved in the complaint are expected to jointly file their case management plan by December 15.
However, what’s peculiar is that Mullen did not provide any additional information regarding the reasons behind Judge Analisa Torres issuing these amended complaint deadlines.
At first glance, this news might not seem substantial enough to justify such a significant surge in MULN stock prices. In fact, it’s quite the opposite, as the stock had experienced a sharp drop of approximately 10% just the day prior following the lawsuit update.
This scenario raises a crucial question: What’s really driving the remarkable uptick in MULN stock today?
A Potent Combination of Factors
- Oversold Bounce: The sudden surge in MULN could be attributed to what’s commonly known as an “oversold bounce.” From September 25 to October 23, MULN faced a staggering decline of around 60%. This downturn was exacerbated when Mullen announced plans for a reverse stock split in a range between 1-for-2 and 1-for-100 at its upcoming special meeting of stockholders. Currently, MULN’s shares are trading well below the Nasdaq’s minimum bid price requirement of $1, and executing a reverse split may be the key to bringing the shares back into compliance. It’s essential to note that Mullen specified that this reverse split would only be enacted if the shares couldn’t naturally reach the $1 mark.
- Short Squeeze Potential: Another possible catalyst for the soaring MULN stock could be a short squeeze. As of September 30, MULN had a significant short interest, with shorts accounting for approximately 19.9% of the float. This translates to a staggering 36.28 million shares being shorted, with a total value of $16.47 million. Generally, a short interest above 10% is considered high, and anything surpassing 20% is considered very high. Consequently, MULN was exposed to an elevated risk of a short squeeze – a situation where short sellers are pressured to buy back shares to limit their losses, potentially driving up the stock price significantly.
In conclusion, while the immediate cause of MULN’s impressive surge remains somewhat elusive, it’s apparent that a combination of factors, including the potential for an oversold bounce and the specter of a short squeeze, are likely contributing to the stock’s remarkable rally.
Investors and traders will undoubtedly be keeping a close eye on Mullen Automotive (NASDAQ:MULN) in the coming days, eager to see how this intriguing situation unfolds.