Mullen Automotive Assets, New Financing, and Accelerating Expansion Expose A Significant Valuation Disconnect ($MULN)

Investors who only read the financial headlines would believe that the value-based opportunities to invest in the electric vehicle sector had come and gone. According to many of those click-bait editorials, the industry is in panic mode, with some dealers even hesitant to push their EV inventory over their combustion engine counterparts. But here's the reality check-while the pace of EV sales may have slowed, the adoption phase is far from over.

Last year, registered EV sales in China, Europe, and the United States neared 14 million, bringing their total number on the roads to 40 million. That number closely tracks the sales forecast from the IEA's [https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars](GEVO-2023), which had modeled a roughly 35% year-over-year increase, about 3.5 million vehicles higher than in 2022. That's six times higher than in 2018. Moreover, the report highlighted over 250,000 new registrations per week, contributing toward EVs accounting for about 18% of all cars sold in 2023, up 14% from 2022. It won't stop there. According to a report [#:~:text=Electric%20vehicles%20will%20account%20for,an%20RMI%20report%20in%20September.] by Utility Drive, by 2030, the global share of EVs on the road could reach 86%, with China potentially leading that charge with an EV market share of at least 90%, according to an RMI report in September.

Thus, capitalizing on fickle market sentiment may be more than an excellent strategy to maximize sector investment returns; based on the declining share prices of EV companies during 2024, it's timely. And taking advantage of a growing valuation disconnect between Mullen Automotive's (NASDAQ: MULN [https://www.mullenusa.com/]) assets, growth, and share price may present one of the best risk/reward propositions.

A Strengthening Mullen Automotive

An evidence-based case published by MULN on Tuesday supports that presumption, highlighting several attractive aspects of this niche-focused EV brand. The biggest takeaway, however, from a sum of its parts perspective is that at its current $0.73 share price*, the value proposition is simply becoming too significant to ignore. (*share price and market cap at 2:50 pm EST, Yahoo! Finance, 08/07/24)

That sentiment certainly isn't overly enthusiastic. Consider this: As of June 30th, Mullen Automotive's total assets are projected to be approximately $191.4 million, exponentially higher than the company's current $18.2 million market cap would indicate. That's not all. Beyond the impressive size of its asset base, Mullen's cash reserves exceed its current market capitalization, further exposing the valuation disconnect and, as importantly, showing a liquidity position that can mitigate downside risk related to market fluctuations and allow for strategic investments without the immediate pressure of searching for acquisition capital.

Here's something else investors generally don't get with a sub-dollar stock-$250 million in financing commitments, which includes a $50 million upfront investment and an additional $150 million equity line of credit. That funding package should materially accelerate Mullen's growth initiatives, expand its production capabilities, enhance its market reach, and scale operations to efficiently meet the increasing demand for commercial EVs. Other important variables contribute to the bullish thesis.

Critical Competitive Separation

Unlike other niche-focused competitors, Mullen has checked the boxes for regulatory compliance and industry certification, successfully meeting all federal and state regulatory requirements for Class 1 and Class 3 commercial vehicles. This achievement must be appreciated and certainly deserves more than the value given because it separates MULN in a competitive landscape by facilitating expedited market entry and qualifying them for state-level incentives that enhance vehicle affordability and drive sales. They even pass the most stringent requirements in California, with their Class 1 EV cargo van and Class 3 EV cab chassis truck earning certification from both the California Air Resources Board (CARB) and the Environmental Protection Agency (EPA).

These certifications, coupled with the likely continuation of federal EV tax credits and California's HVIP voucher program, make Mullen's vehicles not only attractive to buyers but also provide a competitive edge. And MULN isn't just ambitious in meeting demand; it's actively manufacturing and selling commercial Class 1 and Class 3 EVs from production facilities in Tunica, Mississippi, and Mishawaka, Indiana. Those facilities are spearheading growth.

The company announced adding six new dealerships and five new commercial dealer partners that will broaden its market reach, improve customer accessibility, and expedite market penetration by making its vehicles available to a wider range of customers. Positive results from the groundwork completed are accruing.

Subsidiary Interests Add To The Value Proposition

Through its Bollinger Motors subsidiary, Mullen announced it secured agreements to sell over 200 B4 Class 4 EV trucks. Additionally, Mullen is engaging with various sectors, including telecoms, fleet providers, and municipalities, to diversify its customer base and prove, through strategic partnerships, its ability to serve diverse market needs. And not exclusively through vehicle sales. Mullen's commitment to innovation extends into developing solid-state polymer battery packs and is progressing through testing with lead suppliers. Full certification is expected by the second half of 2025.

While that might sound far, milestones scored along the way would be value drivers, especially with intended testing results supporting Mullen's forward-thinking advanced battery technology that offers enormous revenue-generating potential by providing superior performance and safety compared to traditional lithium-ion batteries.

Another value driver worthy of attention is one Mullen announced last week. The company said it launched a new lease program for its Mullen ONE, Class 1 EV cargo van. The bizEV program targets qualified buyers, including individuals, small businesses, and fleets, and is available through Mullen authorized dealers. The attractive terms include a 3-year lease starting at $475 monthly plus applicable taxes and fees, including scheduled vehicle maintenance. The most significant incentive is that by design, the program makes EV ownership more accessible and affordable, especially for small businesses, by removing the traditional upfront costs and providing flexible lease options. That's just one benefit.

Tailored for urban last-mile delivery, the class 1 commercial Mullen ONE EV is designed to navigate narrow streets and maximize cargo space. It's also the first of its kind EV in the U.S. market and is already compliant with U.S. Federal Motor Vehicle Safety Standards, EPA, and CARB clean air emissions standards. Like others in the MULN portfolio, this vehicle is doing more than making commercial EV ownership seamless and affordable. They portray a sustainability commitment that aligns with broader environmental goals and initiatives. This may be an overlooked contributor to value. It shouldn't be.

By the end of this decade, companies that contribute to reducing carbon emissions and promoting cleaner transportation solutions are the likeliest beneficiaries of global consumer interest. Mullen is doing more than meeting that standard; they have a product lineup that is attractive in appearance and often superior in performance.

A Sum Of Its Parts Appraisal

Thus, considering the impressive sum of its parts, which continues to grow, Mullen Automotive may be the ideal consideration for investors wanting exposure to an EV sector that will ultimately dominate the roadways. Sure, the behemoths like Tesla (NASDAQ: TSLA), General Motors (NYSE: GM), and Ford (NYSE; F) have been beaten down in value. However, they still trade at rich premiums compared to MULN, despite the latter being well-positioned financially, checking regulatory compliance boxes, and having innovative technology.

Furthermore, management commentary indicates plenty of additional revenue-generating opportunities are in the MULN crosshairs. In other words, its compelling vehicles, advanced battery technology, and proof that it can expand its presence in challenging markets may only be the starting point of a plan designed to scale quickly and deliver a solid ROI for investors. It's hard to argue against the fact that investors questioning intrinsic strengths have bruised the small caps. However, in that respect, Mullen may be misunderstood.

In about every measurable way, Mullen Automotive is well-positioned to capitalize on the massive opportunities that are quickly becoming mainstream. And with its proactive approach to methodical market expansion, MULN may be more than step ahead of its peer competitors, realizing the rewards of its strategic and accretive agenda could come sooner rather than later. Recognizing that potential and the probability of Mullen reaching it, this second-chance opportunity at basement-level prices may indeed be worth seizing.

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