As our trusty authors have covered in detail, electric vehicle (EV) manufacturer Mullen Automotive (NASDAQ:MULN) just received what looks like a $110 million bailout. However, it’s an awfully flimsy lifeline for an automaker that’s in deep financial trouble. If you’re waiting around for MULN stock to recover, don’t hold your breath. It’s entirely possible that Mullen Automotive will be delisted by the end of this year.

Mullen Automotive already has to compete with the likes of Tesla (NASDAQ:TSLA), an EV industry giant. Tesla has brand-name recognition and is taking proactive steps to offer comparatively affordable vehicles. Meanwhile, Mullen’s EVs are pricey, and that’s a problem during these economically uncertain times.

Typically, I like to root for underdog startups. However, I just can’t see a bright future for Mullen Automotive and its stakeholders. Frankly, it’s better to bail than to stay in a losing trade with a cash-strapped EV maker like Mullen.

MULN Stock Has Fallen and Can’t Get Up

I’m not going to claim that all of the news surrounding Mullen Automotive is negative. In all fairness, I’ll say it’s exciting to see Mullen preparing to test out its solid-state polymer battery technology in the company’s cargo vans.

That won’t happen until the fourth quarter of this year, however. In the meantime, Mullen Automotive’s investors have to worry about MULN stock staying below $1 for too long. The last time I checked, the share price was nowhere near $1.

As you may recall, the Nasdaq exchange issued a noncompliance warning to Mullen Automotive last year because the company’s stock had closed below $1 for 30 consecutive business days. Fast forward to early March of this year, and we can see that the Nasdaq exchange granted Mullen Automotive a 180-day extension to comply with the exchange’s minimum bid price rule.

Alarmingly, Mullen Automotive failed to address this concern in its press release “addressing recent investor inquires.” Granted, I’m not an investor in the company. If I were an investor, however, I would certainly have inquiries: How does Mullen intend to avoid delisting? Will there be a reverse share split?

$110 Million Lifeline Isn’t Enough to Save Mullen Automotive

So, here’s the news item that Mullen Automotive’s investors are buzzing about. A Form 8-K revealed that Mullen has secured $110 million worth of financing. Of that amount, $90 million will come from the issuance of Series D preferred stock and warrants, referred to in a previous filing.

The other $20 million of the $110 million total financing will come from the issuance of “promissory notes,” which “bear interest at a rate of 15% per annum, which increases to 20% per annum if payments under the Promissory Notes are not paid when due.” That’s a hefty price to pay for $20 million worth of financing, wouldn’t you agree?

So, it appears that Mullen Automotive is using the familiar playbook of financially strapped businesses: Raise money by issuing shares/warrants and taking on more debt. These tactics sometimes are enough to rescue a startup from ruin; other times, they’re just not enough.

The Series D preferred stock/warrants deal could potentially dilute the value of existing shares. Furthermore, Mullen Automotive’s debt burden won’t improve if the company continues to solve its problems by taking on more obligations. Bear in mind, Mullen’s total debt ballooned from $9.02 million as of Sept. 30, 2022, to $98.73 million as of Dec. 31, 2022. Adding $20 million worth of “promissory notes” to that total isn’t helping the situation.

Don’t Wait for a Comeback With MULN Stock

Mullen Automotive makes amazing-looking electric cars and vans. Plus, it will be interesting to see Mullen deploy its solid-state polymer battery technology later this year.

However, investors should consider Mullen Automotive’s financial issues. The company is unprofitable and clearly isn’t afraid to use take on more debt as a temporary fix to its problems. Besides, unless there’s a reverse split in the near future, MULN stock is likely to be delisted from the Nasdaq exchange. All in all, Mullen’s long-term shareholders shouldn’t expect a comeback and ought to think about cutting their losses today.

On the date of publication, David Moadel did not have (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.