Judging by a large number of articles about Mullen Automotive (NASDAQ:MULN), and the number of people talking about MULN stock on social media, Mullen has become a leading meme stock with a sizable cult following. However, as hot as it may appear from the outside, the company appears to be untrustworthy to me. I also believe the company could declare bankruptcy at some point. In fact, there are several reasons I believe this.

One, the CEO allegedly has a flawed record. Two, the company allegedly announced deals that weren’t so impressive. Three, the company allegedly has inadequate financial resources and has allegedly failed to obtain backing from major companies. With that, investors may want to consider staying far away from the MULN stock. That is unless they plan to short the stock. Here’s more on why MULN should be avoided.

Reason No. 1: The CEO Has a Highly Flawed Record

Hindenburg Research, for example, noted that Mullen’s CEO David Michery, “led 5 failed penny stock companies prior to Mullen. Two had their securities registrations revoked by the [U.S. Securities and Exchange Commission] SEC, two terminated their securities registrations, and the last one merged with a speculative gold mining company.”

Hindenburg, which was short MULN at the time, added that a company called EV Grid denied Michery’s claim that it determined that the range of batteries developed by Mullen “was almost double that of other top EV companies” and that they “charged more quickly than other batteries.”

In addition, last Jan., Michery claimed that the company would start selling its amazing batteries in 18 to 24 months. However, despite the amount of media coverage the company has received, I’ve heard very little about these batteries in the last six months.

Also, last year, I conducted research on one of the two organizations that, according to Mullen, tested its batteries. That organization — Battery Innovation Center – placed a  man with no relative experience in charge of testing batteries and its main activity appears to be hosting conferences. The other organization cited by Mullen  –EV Grid — was not at all impressed by Mullen’s batteries. Finally, after Michery stated in March 2022 that Mullen was going to reveal the name of a Fortune 500 customer that had ordered EVs from the automaker, the company never revealed the information.  And, after he was pressed on the issue, the CEO explained that the unnamed company only asked Mullen if it could make a better EV than what it was offering.

Reason No. 2: Deals Don’t Stand Up to Scrutiny

Mullen announced multiple deals that, on the surface, seem impressive, but are actually nothing to get excited about.

For example, on Dec. 15, Mullen announced that it had obtained an order for 6,000 of its EVs from Randy Marion Isuzu. But further research revealed that Randy Marion Isuzu is a single auto dealership. As a result,  the idea of it buying thousands of Mullen’s EVs appears to be implausible. In July, Mullen disclosed that it would sell “up to 600 Mullen Class 2 EV cargo vans over the next 18 months” to “an Amazon Delivery Service Partner.”

However, my research showed that this “Amazon Delivery Service Partner” employed only 12 drivers and owned or leased a grand total of six vehicles. The idea of such a company buying 600 EVs from Mullen is laughable.  Also noteworthy is Mullen’s use of the phrase “up to 600 vehicles” to describe the deal. As I wrote previously, ” four EVs, two EVs, or one EV can be ‘up to 600 EVs.’”

Reason No. 3: A Lack of Adequate Financial Resources

As of the end of the third quarter, Mullen had just $54 million of cash on its books. That’s truly a tiny amount for a company that’s undertaking the extremely expensive task of building EVs (and, who knows, maybe it will build batteries, too).

In addition, as another InvestorPlace columnist, Thomas Niel, reported in his Jan. 24 column, “MULN’s share count has ballooned from around 23.4 million to nearly 1.7 billion, over the past year.” Reportedly, the automaker is seeking to sell even more shares of MULN stock now.

The company’s tremendous reliance on using its stock to raise money is causing a downward cycle.  First, MULN sells additional shares, lowering the value of its stock.  Because the value of its stock has dropped, it raises less money from selling each additional share at the next point that it unloads shares to raise money. Consequently, it has to sell even more stock to raise enough funds to stay afloat, starting the process over again. That process is likely to end in tears. And showing that the crying is likely to start sooner rather than later, Mullen has issued a going concern warning.

Reason No. 4: No Big-Time Investors

Other EV start-ups, such as QuantumScape (NYSE:QS), Arrival (NASDAQ:ARVL), and Rivian (NASDAQ:RIVN) have huge expenses and have accumulated large amounts of debt. but these companies have received investments from huge companies, such as UPS (NYSE:UPS), Volkswagen (OTC:VLKAF), and Amazon (NASDAQ:AMZN).  Not only can these EV start-ups use the money they obtained from their investors to get their operations up and running, but, I believe, the investors can make it easier for the start-ups to obtain additional funds. In other words, the large investors, using their many connections, can convince other major companies to invest in the start-ups and persuade banks to provide them with large loans. Apparently lacking such large investors, Mullen is much more likely to run out of money soon.

On the date of publication, Larry Ramer held long positions in RIVN and ARVL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.