Fuel cell-powered truck maker Hyzon’s stock suffers a record drop as accounting questions raise fears of scrap
Shares of Hyzon Motors Inc. made a record drop to a record low Friday after the maker of fuel cell-powered trucks revealed a "huge number of issues" including accounting regularities that would have left it missing the filing TBEN for its second-quarter results. That prompted a number of analysts to distance themselves from their bullish stances, including JP Morgan analyst William Peterson, who became the only bearish analyst on Wall Street. The stock HYZN,
fell 36.5% in very active afternoon trading on Friday, putting it on track for the worst one-day performance since the ticker began trading a year ago.
It was also headed for its all-time low, below the previous record low of £2.94 on June 30, 2022. Trading volume rose to 15.6 million shares, compared to the daily average of approximately 1.8 million shares. The stock traded 65.5% lower than where it closed its first day of trading on the Nasdaq exchange on July 19, 2021, after the merger with special acquisition company (SPAC) Decarbonization Plus Acquisition Corp. was closed.
Hyzon revealed in an 8-K filing with the Securities and Exchange Commission late Thursday that it had begun an investigation into the timing of revenue recognition and internal accounting controls at its Chinese operations.
As a result, the company said it would not be able to submit its audited 10-Q before the August 15 TBEN, meaning it will not meet the Nasdaq's listing requirement. "The delay in filing will not have an 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 Form 10-Q will not affect the listing. or trading of the company's common stock," the company said in a statement. Hyzon has also said its board of directors' audit committee has ruled that its 10-K annual report for 2021 and its 10-Q for the first quarter of 2022 "should no longer be trusted."
That's not all. Hyzon also said it identified "operational inefficiencies" at Hyzon Motors Europe BV, its European joint venture with Holthausen Clean Technology Investments BV. The company said the inefficiencies will have "a material adverse effect" on its ability to manufacture and sell vehicles.
The company said it now plans to restructure its European operations and has hired a consultancy to reassess its global strategies and operations. There's more: the company said it had entered into a share purchase agreement with Holthausen on May 5 to buy approximately 25% of the shares of the Hyzon Motors Europe JV, which would have given Hyzon a 75% stake in the JV. That deal was expected to close in July, but it didn't.
"The company and Holthausen have failed to finalize the terms of the Holthausen transaction and the transaction is not expected to close on the terms originally agreed upon," Hyzon said. "The company and Holthausen are currently renegotiating the transaction." Hyzon said it did not know when, or even if, a new share purchase agreement could be reached. JP Morgan's Peterson, followed by a double downgrade from Hyzon to underweight from overweight, and retracted its price target.
His previous goal was £6. Given all the revelations, Peterson wrote in a research note that he now believes that "investors are unlikely to give the company credit for having strong fuel cell technology and an underrated hydrogen strategy, at least for the coming quarters." He also believes that Hyzon's original "early mover advantage" in fuel cell electric vehicles (FCEVs) is now less likely given the emerging competition, especially in the overseas market in Europe and China.
Wedbush's Dan Ives also downgraded Hyzon's rating from outperform to neutral, while lowering his price target from £7 to £3. "There are more questions than answers at this point with the myriad issues identified in the dossier that we fear may slow down Hyzon's growth story (which has actually been going well for the past six months) with this black cloud now over the story Ives wrote. DA Davidson's Michael Shlisky lowered his rating from buy to neutral and his target price by two-thirds from £12 to £4.
He said the ultimate outcome of the revealed issues could be as simple as minor adjustments and an improved European operation, or changes could be more drastic.
"We just don't know where it's going right now, and these kinds of investigations and restructuring actions can be expensive and distracting," Shilsky wrote. "We are going to the sidelines until we have more clarity on these matters."
The stock is down 56.1% so far, while the S&P 500 index SPX,
has lost 13.2%.