Bit Brother (BETS), Phunware (PHUN), and Mullen Automotive (MULN) are troubled companies whose stocks have plunged by over 90% from their all-time highs. They are penny stocks with little institutional investor ownership. However, they have also become some of the most popular stocks in the market these days. 

Mullen Automotive has averaged over 1.47 million daily traded shares in the past three months while Phunware has averaged 112 million shares. On Friday, the latter had over 63 million shares exchange hands. BETS, on the other hand, has averaged over 500 million shares in the past 2 months.

The three companies have weak fundamentals. Mullen Automotive is a cash burning machine that has lost millions of dollars in the past few years. Data compiled by SeekingAlpha shows that its total net loss in the past five years has totaled over $1.9 billion.

Mullen will likely continue losing money even though the company has started delivering some of its vehicles to customers. Most importantly, it is in an industry that is going through challenges as even bigger companies like Tesla struggle. Tesla has slashed prices of its vehicles again, a sign that there is little demand.

Mullen Automotive is no longer a penny stock after the company did a reverse split. Still, the shares have lost over half of their value since the split happened in January. This means that it will soon move into the penny stock category.

The company faces a tough challenge ahead as its balance sheet remains in trouble. I suspect that it will need to raise additional capital this year since it is still building its SUV projects. 

Bit Brother is in more trouble than Mullen. For starters, Bit Brother was formerly known as Urban Tea until 2021 when it changed its name to take advantage of the Bitcoin mining industry. It is now a small miner that has bought some locations recently. Like Mullen, the company has been highly dilutive as it raised millions of dollars to fund its development.

Phunware, which I wrote about here, is also a troubled company that has done well in the past 30 days. It did that as it joined other Trump-associated companies like DWAC and Rumble after he won nominations in Iowa, New Hampshire, and Nevada. 

Phunware is associated with Trump because it helped him design his applications in the last campaign. Fundamentally, however, the company has been in trouble as its revenue dropped from $4.8 million in the September quarter of 2022 to $2.8 million in the last quarter. Its quarterly losses have jumped to over $19 million. The company has been highly dilutive and this month, it priced a $10 million offering.

These three companies are popular among day traders because of their cheaper prices and the crowd mentality. The idea is that big companies like Apple, Nvidia, and Berkshire Hathaway have become highly expensive these days. Nvidia was trading at $721 on Friday while Berkshire Hathaway’s class B were trading at $398. Class A shares were trading at $599,090. 

As such, while fractional investing is possible, day traders believe that allocating money in small penny stocks can be more profitable. In this case, it is possible to get more shares by just investing as little as $100.

To some extent, these day traders have been successful. For example, Phunware stock has jumped by almost 400% from its lowest point this year. However, in the long-term, these stocks have underperformed as they have all crashed by double-digits. Mullen is down by over 51% in 2024 while Bit Brother has crashed by over 73% this year.

All this is not to say that it traders should short them because most of them will go bankrupt. Shorting PHUN, MULN, and BETS can be risky because the day trading army can pump them. We have seen this with PHUN and other penny stocks recently.

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