Shares of Hyzon Motors Inc. suffered a record drop to a record low on Friday, after the fuel cell truck maker disclosed a ‘myriad of issues’, including accounting irregularities that will cause it to miss the filing deadline. for the second quarter results.
This prompted a number of analysts to exit their bullish positions, including JP Morgan analyst William Peterson, who became Wall Street’s only bearish analyst.
The HYZN strain,
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 heading for its lowest close on record, below the previous high of $2.94 on June 30, 2022.
Trading volume reached 15.6 million shares, compared to a full-day average of about 1.8 million shares.
The stock was trading 65.5% below the level where it closed its first day of trading on the Nasdaq Stock Exchange on July 19, 2021, following the closing of the merger with special purpose acquisition company (SPAC) Decarbonization Plus Acquisition Corp.
Hyzon revealed Thursday night in a 8-K rating with the Securities and Exchange Commission that it had initiated an investigation into the revenue recognition timing and internal accounting controls of its operations in China. As a result, the company said it would not be able to file its audited 10-Q by the August 15 deadline, meaning it would not comply with the Nasdaq listing requirement.
“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 assurance that further delays in filing Form 10-Q will not impact listing or trading in the common stock of the company’s common stock,” the company said in a statement.
That’s not all. Hyzon also said it has identified “operational inefficiencies” at Hyzon Motors Europe BV, which is its European joint venture with Holthausen Clean Technology Investments BV. The company said the inefficiencies will have “a significant negative effect” on its ability to produce and sell vehicles.
The company said it now plans to restructure its European operations and has retained the services of a consultancy to help it reassess its global strategies and operations.
There’s more: the company said that on May 5, it entered into a stock purchase agreement with Holthausen to buy approximately 25% of the shares of the Hyzon Motors Europe joint venture, which would have given Hyzon a stake of 75% in the joint venture. This agreement was supposed to be concluded in July, but it is not the case.
“The Company and Holthausen have not been able to finalize the terms of the Holthausen transaction, and the transaction is not expected to close on the terms originally agreed to,” Hyzon said. “The company and Holthausen are currently working to renegotiate the transaction.”
Hyzon said he does not know when, or even if, a new stock purchase agreement might be reached.
JP Morgan’s Peterson followed with a double downgrade of Hyzon from underweight to overweight and removed his share price target. His previous target was $6.
Given all the revelations, Peterson wrote in a research note that he now thinks “investors are unlikely to give the company credit for having an underappreciated solid fuel cell technology and hydrogen strategy, at least for the next quarters”.
He also believes that Hyzon’s original “pioneer advantage” in fuel cell electric vehicles (FCEVs) is now less likely given the emerging competition, especially in overseas markets in Europe and China.
Wedbush’s Dan Ives also downgraded Hyzon from neutral to outperforming while reducing his share price target to $3 from $7.
“There are more questions than answers at this time with the myriad of issues identified in the filing that we fear will slow Hyzon’s growth story (which has been progressing well over the past six months) with this dark cloud now over history,” Ives wrote.
DA Davidson’s Michael Shlisky cut his rating to neutral to buy and his price target by two-thirds, to $4 from $12. He said the eventual outcome of the disclosed issues could be as simple as minor rewordings and improved European operation, or changes could be more drastic.
“We just don’t know where things will go at this point, and these types of investigations and restructuring actions can be costly and distracting,” Shilsky wrote. “We are moving to the sidelines until we have more clarity on these issues.”
The stock has plunged 56.1% since the start of the year, while the S&P 500 SPX index,