When Mullen Automotive (NASDAQ:MULN) released its Q1 results on Feb. 14, traditional investors might have felt a pang of despair. The zero-revenue electric vehicle firm lost another $376 million in a single quarter — an impressive feat for a firm worth only $400 million on public markets. Corporate governance watchdogs would have also balked. CEO David Michery and other officers were awarded $36 million in stock compensation for that performance — an incredible payday for a firm that has yet to build a single production vehicle of its own.

But it’s hard to be mad at a firm like Mullen. That’s because, against all odds, the electric vehicle startup continues to exist. Mullen continues to trend on Reddit and Stocktwits… And Mr. Michery remains adept at raising money to stave off bankruptcy.

Much like Will Ferrell’s character in Anchorman, I’m actually not even mad. Because what Mullen is doing is nothing short of…well… amazing.

MULN Stock and the Dark Side of Meme Investing

Obviously, any praise of Mullen comes with a major disclaimer:

The electric vehicle startup has been exceptional at transferring cash from external investors to corporate insiders.

No matter your views on corporate ethics, it’s hard to argue with the millions in compensation that David Michery and his team have received over the years. The company’s board is stacked with insiders and they have had little trouble in awarding the CEO a lion’s share of anti-dilutive shares… even as regular shareholders see stakes evaporate. Corporate shares outstanding have ballooned from 24 million in 2022 to around 1.75 billion today.

However, these dilutive offerings have also managed to keep Mullen alive.

Since 2020, the firm has raised around $350 million in stock and bonds — a necessity since Mullen consumes around $180 million of cash per year. And with only $68 million of cash left in the bank, the EV firm will need to raise at least another $100 million to tide itself to year-end, assuming no change in its cash burn rate.

Mullen has also been active in the debt markets. Its latest deal raised another $150 million in notes, an incredible feat given its already Byzantine shareholding structure. Concessions involved a 10 cent conversion floor price, 15% interest rates, and free warrants exercisable at 185% of the common stock price… just in case stock prices go up after the first exercise.

Such funding is essential for electric vehicle firms that design and build their own products. Between 2006-2010, Tesla (NASDAQ:TSLA) used almost $400 million in cash while generating less than $150 million in revenues. And Amazon-backed EV startup Rivian (NASDAQ:RIVN) has eaten through over $8 billion in three short years. Building new car factories is expensive, and Mullen has decided to go that route knowing the risks.

Raising Money Is Hard Work

The amazing, levitating Mullen comes with one major question:

How can it get away with this?

In Q4 2022, the Brea, California-based firm appeared to “receive” over $40 million back from its recent acquisition of Bollinger Motors. The two companies had publicly agreed on a $107 million cash and $41.6 million stock transfer, yet only $29.6 million ever left Mullen, according to its most recent annual report. (This is usually either an accounting error or a “round-trip” transaction to artificially increase asset values).

The acquisition accounting also used extremely aggressive valuation methods to produce $90 million in intellectual property and patents, even though Bollinger only showed $4.3 million in assets prior to the deal.

Mullen’s Q1 filing shows a continuation of these strategies. The firm’s accountants decided to assign $33 million of the Electric Last Mile Solutions acquisition to “personal property” and $22 million to “engineering design,” vague terms that keep acquired assets out of the dreaded “goodwill” bucket. (A large goodwill figure often suggests a company overpaid for acquisitions).

No matter how you frame Mullen’s Q1 report, it’s amazing to see how accountants have conjured up a fortified balance sheet by throwing its income statement to the wolves. Not only has the EV firm posted record derivative liability losses in Q1 to help shore up its cash position. The firm has also used aggressive accounting methods in past quarters to move as much out of goodwill and into “intangible assets” as it could.

The An Increasingly Uphill Battle

Venture capital investors have long understood the importance of “fake it ’til you make it.” Startups can often require billions in funding, and only the most self-assured entrepreneurs have a shot at keeping impatient creditors at bay. Amazon (NASDAQ:AMZN) took six years as a public company to turn its first profit. Tesla needed 10. It’s no surprise that most startup founders are typically characterized by charisma… and hubris.

Much of the automotive world has rightly decided that this high-flying, tightrope-walking act isn’t for them. Most new Chinese car companies contract with existing manufacturers rather than build from scratch. And promising young automotive firms from QuantumScape (NASDAQ:QS) to Mobileye (NASDAQ:MBLY) have decided to focus on single elements of electric vehicles, rather than attempt to create the entire car. It’s a clever way to reduce financial risks, while keeping the same upsides of an electric vehicle startup.

But Mullen and its executive team have decided to double down on doing everything themselves, including design, development, production, sales and fundraising. They’ve polished their balance sheet to a shine. And they continue to raise cash and dilute existing shareholders as an ordinary course of business.

Eventually, the trick becomes harder to pull off. Impatient bondholders start demanding to see production vehicles. Goodwill begins to overwhelm Mullen’s balance sheet, decreasing its attractiveness. And retail investors eventually tire of losing money. No levitation trick lasts forever.

Still, one can only watch in awe at how Mullen keeps it all together. Because despite the long odds, Mr. Michery and his company remain a levitating wonder.

On the date of publication, Tom Yeung 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.