Market analyst and portfolio manager of the Omnia Portfolio, Tom Yeung predicts a MULN short squeeze this week.
Mullen Automotive (NASDAQ:MULN) has grown in popularity this year after analysts gave the stock a +7,000% price prediction in January.
However, MULN stock has dropped more than -85% this year-to-date despite several positive developments within the company.
“Mullen’s recent short-share order imbalance should have short sellers worried.
We’ve seen this story before in other meme stocks.
And the most dangerous thing to assume is that this time is any different,” says Yeung.
He argues that traders are generally hypersensitive to price action, making a short squeeze more likely.
Combined with positive news and its ongoing short selling investigation, MULN stock may just begin to skyrocket.
“Mullen has a hyperactive options ring that can contribute to a gamma squeeze.
Speculators buying call options generally cause market makers to buy an offsetting leveraged long position in the stock, which means every $1.00 invested in options is much like buying $10 of shares.
That means a short squeeze in Mullen could send shares up anywhere from the $2 range to the $5 range, depending on how many retail investors suddenly hop on board and assuming a squeeze happens in the first place.”
What Will Trigger a MULN Short Squeeze?
Massive buying pressure will trigger a MULN short squeeze, especially with how high it’s costing short sellers to borrow stock at the moment.
Mullen’s cost to borrow is now reaching new highs.
Ortex reports Mulllen’s live cost to borrow at 389.63% with the max cost to borrow having reached 454.59% on Thursday of last week.
The cost to borrow, per Ortex, is the annualized percent of interest on loans, typically borrowed by brokers and hedge funds.
This percentage figure may change on a daily basis and level out through its ‘cost to borrow average’.
Today, Mullen’s CTB is over 330%.
Hedge funds short on MULN stock are paying this massive interest rate just to be able to continue shorting it.
In the meantime, it costs retail investors nothing other than unrealized losses to buy and hold the stock.
Hedge funds risk getting squeezed out of this play while having accumulated cost to borrow fees in the process.
Ultimately, as we’ve seen with both AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME), it’s heavy buying pressure that created a chain reaction of short positions closing all at once.
This is what we’ll need to see from shareholders if we’re to ever see a MULN short squeeze.
MULN Short Interest Today
Why is MULN a short squeeze candidate in the first place?
It has enough short interest to squeeze shorts from their positions.
MULN stock has a short interest of 17%, updated daily here.
How high a MULN short squeeze goes will depend on the percentage of short positions that close in sync.
AMC stock rose more than 3,000% when shares rose to their all-time high of $72.
Short interest at the time had dropped from 22% to 14% as share prices soared.
Whether or not short sellers decide to close their positions will highly be influenced by whether retail investors are able to drive share prices up through heavy buying momentum.
But I’d love to hear your opinion on this.
Will MULN short squeeze this week?
Leave your thoughts below.
Other Mullen Automotive Stock News
BlackRock Inc. (NYSE:BLK) has increased their stake in Mullen Automotive stock by a whopping +178.96%.
BlackRock filed a 13F-HR form on Friday, May 12, 2023, revealing that it now owns 73,710,135 shares of Mullen Automotive Inc as of March 31, 2023.
EV Edition says “this is a significant increase of 178.96% in shares compared to its previous 13F-HR filed on February 13, 2023, where it disclosed ownership of 26,422,834 shares.”
The current value of BlackRock Inc.’s position is now $103,194,189 USD.
Media outlets are now publishing a “bull case” for Mullen Automotive, stating that MULN stock is a buy today.
“Some skeptics might assume that an EV startup like Mullen Automotive is a destitute “zombie” company. Yet, that’s actually not true at all. As of April 30, Mullen possessed $116.1 million of cash available for operations,” says an InvestorPlace contributor.
Whether MULN stock is a buy or not will depend highly on the conviction of individual investors.
Mullen Automotive might targeted by Wall Street short sellers, but the company has released several positive developments which could be enough to take a small position in the company.
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