Cost to Borrow Mullen (MULN) Stock Is Down 93% From Peak thumbnail

Cost to Borrow Mullen (MULN) Stock Is Down 93% From Peak

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The Mullen (MULN) Five vehicle is displayed at the 2021 LA Auto Show media day in Los Angeles, November, 18, 2021.

Source: Ringo Chiu / Shutterstock.com

Mullen Automotive (NASDAQ:MULN) stock’s cost to borrow (CTB) fee has been taken on a wild ride over the past few weeks. Today, the fee tallies in at 47.76%, down about 93% from a peak of 742.53% on Jan. 3. On Dec. 23, the fee was as low as 8.55%. That means that the CTB fee rose more than 8,500% between Dec. 23 and Jan. 3.

The CTB fee reflects what short sellers must pay to borrow shares. When short seller demand is high, the fee rises — and vice versa. A higher fee can also reflect a scarcity of available short shares.

At the same time, a high CTB can be perceived as a good sign for MULN stock investors. Let’s get into the details.

MULN Stock: Cost to Borrow Fee Falls Again

When CTB fees increase to exorbitant levels, short sellers may be influenced to cover their positions in an attempt to escape the high fee. In addition, a high CTB skews the risk-reward model implemented by many short sellers. These short sellers may cover by buying the underlying stock, which can lead to a stock price increase.

Still, the current 47.76% fee remains elevated. According to The Street, the average CTB fee is between 0.3% and 3% per year. A high CTB fee is classified as 20% or greater.

Fintel notes that MULN stock carries a short interest as a percentage of float of 10.83%. That’s equivalent to 161 million shares shorted based on a public float of 1.48 billion shares.

Meanwhile, Mullen’s management has other pressing issues to worry about. On Dec. 29, the electric vehicle (EV) company disclosed that it was late in filing its Form 10-K with a Form NT 10-K. NT stands for “non-timely.” The company attributed the delay to needing more time to value its warrants and has hired an independent third party to assist with this valuation. Now, the company has until Jan. 13 to file the form.

On top of that, another catalyst is just around the corner for the company. Mullen was initially supposed to hold its special meeting of stockholders on Dec. 23. However, the meeting was postponed to Jan. 19. Several significant proposals will be voted on at the meeting, such as a reverse stock split and increasing authorized common stock to 5 billion from 1.75 billion.

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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.