Hyzon Motors is the latest electrification startup to crash after going public through a special purpose acquisition company. The maker of hydrogen fuel cell systems for heavy-duty trucks pulled its forward financial guidance, sending its shares down 38%.
Hyzon told the Securities and Exchange Commission late Thursday that it won’t report second-quarter earnings as expected on Aug. 15. And it said its financial reports for the first quarter and full-year 2021 no longer can be relied upon.
The U.S.-based spinoff of Singapore’s Horizon Fuel Cell Technologies has made most of its early business announcements for projects in Asia, Europe and Australia.
Whale of a tale
Short seller Blue Orca Capital, in a 20-page report last September, alleged that Hyzon’s largest customer, Shanghai HongYun, was a “fake company” formed days before announcement of a deal to supply 500 fuel-cell vehicles.
Hyzon denied those allegations. But the SEC in January subpoenaed documents and information about the Blue Orca report.
In its SEC filing late Thursday, Hyzon said company management “has become aware of revenue recognition timing issues in China.” A board-appointed special committee and external advisers are investigating.
Hyzon’s board reassesses strategy
The Hyzon board of directors has retained a third-party consulting firm to assist the board and management with reassessing Hyzon’s global strategy and operations.
“We acknowledge the serious nature of this development and are working diligently … to resolve this matter as quickly as possible,” Hyzon said in a statement. “Due to these findings, financial statements and guidance previously issued by the company can no longer be relied upon.
“The delay in filing will have no immediate effect on the listing or trading of the company’s common stock, although there can be no assurances that further delays in the filing of the Form 10-Q will not have an impact on the listing or trading of the company’s common stock,” the statement said.
Hyzon’s European issues
Hyzon also said it “has identified operational inefficiencies at Hyzon Motors Europe B.V., the company’s European joint venture with Holthausen Clean Technology Investments B.V. The company’s plan to purchase 25% of the shares in the joint venture — giving it 75% ownership — has been unsuccessful. Hyzon said the deal may not go through.
The collective uncertainty about Hyzon’s future sent investors scurrying to dump Hyzon (NASDAQ: HYZN) shares on Friday. Trading volume spiked to 17.9 million shares, compared with the typical daily average of 2 million shares changing hands. Hyzon closed at a 52-week low of $2.78.
The selloff continued Monday. Hyzon closed down 11.87% to set an all-time low of $2.45.
Analysts who follow the company downgraded their estimates.
J.P. Morgan analyst William Peterson double downgraded the stock to underweight from overweight. He withdrew his $6-a-share stock price target.
Peterson wrote in a research note that given the disclosures, “investors are unlikely to give credit to the company for having strong core fuel-cell technology and an underrated hydrogen strategy, at least for the next several quarters.”
Wedbush Securities analyst Dan Ives downgraded Hyzon to neutral from outperform, cutting his stock price target to $3 from $7.
“There are more questions than answers at the moment with the myriad of issues identified in the filing that we fear could slow down the growth story of Hyzon (that was actually progressing well the last six months) with this black cloud now over the story,” Ives wrote.
D.A. Davidson analyst Michael Shlisky dropped his rating to neutral from buy and his price target to $4 from $12.
“We simply do not know where things will go at this point, and these types of investigations and restructuring actions can be expensive and distracting,” Shlisky wrote. “We are moving to the sidelines until we have more clarity on these matters.”
Hyzon latest add to list of troubled startups
Hyzon is just the latest former SPAC to run into trouble. Electric Last Mile Solutions, a maker of Class 1 battery-powered delivery vans based on imported components from China, filed for Chapter 7 bankruptcy liquidation in June. Lordstown Motors Corp., which plans to produce commercially focused electric pickup trucks, sold itself in May to Taiwan’s Foxconnon to survive.
Just last week, battery- and hydrogen-powered fuel cell truck startup Nikola Corp. announced an all-stock purchase of struggling battery pack maker Romeo Power.
Startup Canoo Inc., which like Lordstown filed a notice of going concern with the SEC, got at least a temporary reprieve in July when Walmart said it would purchase 4,500 of its Class 1 delivery vans.
Editor’s note: Updates with Monday’s closing share price