Hyzon Motors is the latest electrification startup to fail following its initial public offering via a special purpose acquisition company. The manufacturer of hydrogen fuel cell systems for heavy-duty trucks revised its financial outlook, sending its stock down 38%.
Hyzon informed the Securities and Exchange Commission late Thursday that it will not release second-quarter profits on August 15, as scheduled. It also stated that its financial reports for the first quarter and full year of 2021 are no longer reliable.
The Singapore-based subsidiary of Horizon Fuel Cell Technologies has made the majority of its initial business announcements for projects in Asia, Europe, and Australia.
A whale of a story
Blue Orca Capital, a short seller, claimed in a 20-page study in September that Hyzon’s largest customer, Shanghai HongYun, was a “fake firm” founded days before the announcement of an agreement to deliver 500 fuel-cell vehicles.
These charges were disputed by Hyzon. However, the SEC subpoenaed papers and information related to the Blue Orca study in January.
Hyzon stated in a late Thursday SEC filing that firm management “has become aware of revenue recognition timing concerns in China.” A special committee created by the board of directors and external consultants are conducting an investigation.
Hyzon’s board is rethinking its strategy.
The Hyzon board of directors has hired a third-party consulting firm to help the board and management reevaluate Hyzon’s global strategy and operations.
“We recognize the gravity of this event and are working tirelessly… to remedy this situation as soon as possible,” Hyzon stated in a statement. “As a result of these discoveries, the company’s prior financial statements and recommendations cannot be relied on.”
“The delay in filing will have no immediate effect on the company’s common stock’s listing or trading, although there can be no assurances that additional delays in the filing of the Form 10-Q will not have an impact on the company’s common stock’s listing or trading,” the statement stated.
Hyzon’s European problems
In addition, Hyzon stated that it “discovered operational inefficiencies at Hyzon Motors Europe B.V., the company’s European joint venture with Holthausen Clean Technology Investments B.V.” The company’s intention to purchase 25% of the shares in the joint venture, giving it 75% ownership, was unsuccessful. According to Hyzon, the purchase may not go through.
On Friday, investors rushed to sell Hyzon (NASDAQ: HYZN) stock due to widespread anxiety over the company’s future. Trading volume increased to 17.9 million shares, compared to the daily average of 2 million shares. Hyzon hit a 52-week low of $2.78.
Analysts who follow the company have reduced their projections.
Analyst William Peterson of J.P. Morgan lowered the stock from overweight to underweight. He lowered his stock price target to $6 per share.
Given the disclosures, “investors are unlikely to give credit to the firm for having good core fuel-cell technology and an underestimated hydrogen plan, at least for the next several quarters,” Peterson wrote in a research note.
Wedbush Securities analyst Dan Ives lowered Hyzon from outperform to neutral and reduced his stock price objective to $3 from $7.
“There are more questions than answers at the present with the multiplicity of difficulties listed in the filing that we believe will slow down Hyzon’s growth story (which has actually been doing nicely over the last six months) with this black cloud looming over the story,” Ives wrote.
Michael Shlisky of D.A. Davidson reduced his rating from buy to neutral and his price target from $12 to $4.
“We just do not know where things will go at this time,” Shlisky wrote. “These types of investigations and restructuring measures may be costly and distracting.” “We are taking a step back until we get greater clarification on these issues.”
Hyzon is the most recent addition to the list of troubled businesses.
Hyzon is the most recent former SPAC to be in difficulties. In June, Electric Last Mile Solutions, a manufacturer of Class 1 battery-powered delivery vehicles based on imported Chinese components, filed for Chapter 7 bankruptcy liquidation. Lordstown Motors Corp., which intends to manufacture commercially focused electric pickup trucks, sold itself to Taiwan’s Foxconn in May in order to survive.
Nikola Corp., a battery- and hydrogen-powered fuel cell truck startup, announced an all-stock acquisition of ailing battery pack maker Romeo Power just last week.
Canoo Inc., which, like Lordstown, filed a notice of going concerned with the SEC, received a temporary respite in July when Walmart announced plans to buy 4,500 of its Class 1 delivery vans.
