Mullen is trading lower after “apparently misrepresented the test results”, Research firm says

Written by Cláudio Afonso |

Mullen Automotive shares are currently trading 4% lower at $2.61 after Hindenburg Research’s report released on Wednesday, April 6. After the initial disclosure revealing the short position taken on Mullen shares, the research firm enumerates several reasons to justify its position on Mullen. Nate Anderson, founder of Hindenburg Research, is known for targeting companies that he thinks are overvalued and have suspect financials. The CEO had also other electric vehicle makers as a target like Nikola Corp. and Lordstown Motors.

After extensive research, we have taken a short position in shares of Mullen Automotive, Inc. (NASDAQ:MULN). This report represents our opinion, and we encourage every reader to do their own due diligence. Please see our full disclaimer at the bottom of the report.

Hindenburg Research

According to CNN, Anderson has a history of looking for financial problems. He worked for market data firm FactSet as well as several hedge funds before starting Hindenburg in 2018. He said he was often attracted to looking for frauds, money laundering and Ponzi schemes.

“I always had this passion for digging and investigating. I’m very focused on deep-dive research.”

Nate Anderson, founder of Hindenburg Research

Hindenburg Research on Mullen Automotive

  • Mullen is an aspiring EV manufacturer that came public in late 2021 via reverse merger. It has yet to produce a sellable vehicle.
  • The company’s stock has spiked ~316% in the past couple of months driven by retail investor euphoria over bold claims of ground-breaking technology, near term production of its EV vans, and a major as-yet-unnamed Fortune 500 customer.
  • Despite only spending ~$3 million in R&D in 2021, Mullen claims its solid-state battery technology is on track for commercialization in 18 to 24 months, putting it head of every major technology and automaker in the industry who have collectively invested billions on solving the problem.
  • Mullen recently press released an update on its battery testing, sending its stock soaring 145% in a day. In reality, the “news” appears to be a rehash of testing the company had already announced in 2020.

  • Mullen apparently misrepresented the test results, according to the CEO of the company that performed the tests. Its CEO told us of Mullen’s press release: “We never would have said that. We never did say it and certainly wouldn’t have said it based on the results of testing that battery.”
  • In 2020, Mullen announced a joint venture to manufacture its sold-state battery technology. We spoke with a senior executive familiar with the supposed JV who told us “It didn’t exist at all”. It was an apparent fabrication. He called Mullen CEO David Michery “fast talking” and a “hustler”.
  • Mullen’s battery claims were based on technology licensed from a 1-year-old Chinese battery technology company. After hyping the importance of the relationship, Mullen made one payment under the deal and promptly terminated the relationship. The Chinese company’s website no longer works.
  • Recently, Mullen shocked the market by claiming it would begin manufacturing 2 models of electric vans within months for an unnamed “major, major Fortune 500 customer”. The news sent its stock up ~35% intraday.

  • The 2 electric cargo vans that Mullen claims it will be manufacturing are actually Chinese EVs rebranded with a Mullen logo. Import records show the company recently imported 2 vehicles from China, one of each model.
  • Mullen has other major production hurdles. The company has no EPA certificates for its vans (nor any vehicle), a requirement to sell vehicles in the U.S. that often takes 12-18 months. It has only a handful of job openings for its plant, and hasn’t begun significant hiring, according to the President of the Tunica County Chamber of Commerce.
  • Previously, Mullen had announced purchase orders valued at $60 million for 1,200 Class 2 commercial EV fleet vans. The order came from a small cannabis retailer with only one location and a new online store that says it prefers to ship via USPS.
  • In 2019, the Mullen DragonFly was revealed as a supercar built by Chinese manufacturer Qiantu Motors and was meant to be rebranded and sold by Mullen starting in 2020. Following the reveal, Mullen immediately defaulted on its payment obligations to Qiantu, leading to termination of the agreement in October 2019.

  • Mullen continued to market the vehicle as its own. In legal documents, Qiantu alleges this is “an inexcusable misuse of Qiantu’s own intellectual property”. Despite the termination of the agreement, Mullen to this day still says the DragonFly is “Coming Soon” on its website and is soliciting $1,000 reservations for the vehicle.
  • For its other proposed vehicle, an electric SUV, Mullen previously announced it received an order for 10,000 vehicles, representing $500 million in potential revenue. We called the South Florida contractor firm that placed the order. It currently has only around 11 vehicles, none of which are electric.
  • Mullen’s plant in Tunica Mississippi was previously tooled to build a pizza delivery car, but prior owners never managed to sell a single vehicle.
  • Mullen originally said the 124,700 sq/ft facility would serve as a pilot plant, but after abandoning several other plant projects, Mullen now claims it intends to expand the plant 10x, or an additional 1.2 million sq/ft, with no details on how this will even be physically possible.

  • Mullen claims its former pizza car manufacturing facility in Mississippi is stocked with state-of-the-art equipment and machinery, but photos and video of the facility show it has limited equipment.
  • Mullen’s website features one photo of advanced manufacturing equipment. We found that it was a stock photo which appears to have been purchased from Adobe stock images.
  • Mullen’s Founder, Chairman and CEO, David Michery led 5 failed penny stock companies prior to Mullen. Two had their securities registrations revoked by the SEC, two terminated their securities registrations, and the last one merged with a speculative gold mining company.
  • Michery merged one of his prior entities as part of a 3-way deal with an individual who was later charged with criminal securities fraud and sentenced to 30 years in prison. Prosecutors alleged that the merger deal involving Michery’s prior company was part of the scheme.
  • Michery lists no educational background in his Mullen biography. Contrary to other top electric vehicle executives that have engineering and manufacturing backgrounds, Michery’s past work experience was largely in the entertainment industry.

  • Mullen’s top holder is Terren Peizer, who controlled 29% of the company’s voting power as of fiscal year-end. Peizer has backed numerous companies whose stocks have spiked to euphoric highs, only to plummet later.
  • Peizer hired an individual just released from prison for fraud to one of his investment vehicles. The individual was later re-indicted on new fraud charges and sent back to prison.
  • Peizer also has close business ties to Michael Wachs, Mullen’s 3rd largest shareholder who controlled 8.1% of the company as of a recent prospectus. Wachs served time in jail for bank fraud after he pled guilty in 1997 to defrauding Chase Manhattan Bank for $20 million.
  • We have seen this story before, but Mullen strikes us as one of the worst. With echoes of Nikola, Lordstown, Kandi and Ideanomics, we think Mullen is just the latest in a long line of EV hustles.

Mullen Automotive announced this Monday the promotion of Mullen executive John Taylor to the role of senior vice-president of Global Manufacturing and Strategic Planning. Taylor joined Tesla in 2010 being one of the first 50 employees, leading the advanced manufacturing engineering group. Taylor played a critical role in opening Tesla’s Fremont facility and manufacturing operations for the Tesla Model S and architecture for future EV projects.

As previously highlighted, Taylor brings a great breadth of experience, including oversight of several plant start-ups and over 12 vehicle launches in the U.S. and internationally.  In 1987, Taylor graduated from the Philpot School of Automotive Design in Detroit and began his automotive career with General Motors. At GM, he was involved with 11 major automotive vehicle launches while serving as launch manager, operations manager, and machine and equipment manager, among other roles — Mullen stated.

On April 1, Mullen Automotive CEO David Michery filed a SEC form announcing changes in beneficial ownership with transactions made betwen March 22 and March 28, 2022. Michery sold 300,000 shares at an average price of $2.495 ($748,500 USD), disposed of 428,382 contracts and acquired 1,198,328 contracts. Last December, Michery had filed a form disclosing ownership of 22,174,720 shares of Mullen — 62.5% ownership.

Last week, Mullen’s CEO unveiled many catalysts for the American EV maker (Full interview here). Michery was one of the guests of Benzinga Listmaker Show showed confidence when asked about the chip shortage issues: “We’re fairly confident that we identified enough partners to ensure that we’re not gonna to have any delays in the builds of our products”. The Company has two electric vehicles under development, one of which we expect to begin delivery of in the second quarter of 2024.

“I really wanted credit Elon Musk and Tesla for opening the door for all the EV guys, including myself to give us an oportunity to be successful. At the end of the day, when we sat down and we looked to what we wanted to do and what people were doing, we said “Listen, it doesn’t have to be a cheap car, it doesn’t have to be a small car, it doesn’t have to compete for the cheapest car in America. But it has to be something that is appealing, “Design does sell”, and performances definitely gathers a lot of attention.” — David Michery said.

Recently, the company announced that it expects to report in excess of $65 million in cash and cash equivalents when it files Form 10Q for the Company’s second quarter ending March 31, 2022. “We’ve made tremendous progress in key areas over the past three months,” said David Michery, CEO and chairman of Mullen Automotive. “With the financing we received, we now have more than enough capital to execute on our commitments for 2022, including the start of the Mullen FIVE EV Crossover program and continued development on the Mullen ONE EV Cargo Van program. The Company’s balance sheet is the strongest it has ever been in our history.

Recently and related to Mullen‘s article published by Wccf Tech, CEO David Michery enhanced the supporters that have been bringing a lot of attention to the EV maker during the last weeks. The Wccf Tech article highlights the continued interest Mullen is seeing from a growing fan base for the Mullen FIVE EV Crossover.

Mullen’s CEO was recently on the 199th episode of Risk On Podcast on Wednesday. Michery talked about Mullen’s origins, the design options to increase the performance, the battery tech updates. Also Mullen’s loan status and the acceptance of Bitcoin as a payment were among the themes.

Recently, CarBuzz, world’s premier car-related news site and app with over 9 million monthly visits, highlighted Mullen’s FIVE Model saying that the model is luxury crossover in the fullest sense of the word luxury. The publication says that “the California-based company will be joining Tesla, Rivian, and Lucid as real American competition to legacy automakers as the EV market grows.” CarBuzz also enhanced that the model is “designed and engineered in the U.S. and set to be built here in the U.S. as well”.

Written by Cláudio Afonso |