Stock of Hyzon, the fuel cell truck maker, suffers a record low after accounting questions raised delisting fears.
The shares of Hyzon Motors Inc. It suffered a record drop toward a record low on Friday, after the fuel cell truck maker revealed “a myriad of issues,” including regular accounting procedures that will lead to a missed registration deadline in the second quarter. Results.
This prompted a number of analysts to step back from their bullish positions, including JPMorgan analyst William Peterson who flipped out to become the only bearish analyst on Wall Street.
It fell 36.5% in very active afternoon trading on Friday, putting it on track for its worst one-day performance since the index began trading a year ago. It was also heading for an all-time low, below the previous record low of $2.94 set on June 30, 2022.
Trading volume increased to 15.6 million shares, compared to a full-day average of about 1.8 million shares.
The stock traded 65.5% below that as it closed its first day of trading on the Nasdaq on July 19, 2021, following the closing of the merger with Special Purpose Acquisition Corporation (SPAC) Decarbonization Plus Acquisition Corp.
Hyzon revealed late Thursday in an 8-K filing with the Securities and Exchange Commission that it has begun an investigation into the timing of revenue recognition and internal accounting controls in its China operations. As a result, the company said it will not be able to submit a 10-Q review by the August 15 deadline, which means it will not comply with the NASDAQ listing requirements.
“Delays in filing will have no immediate effect on the listing or trading of the Company’s common stock, although there are no assurances that further delay in filing Form 10-Q will have no effect on the listing or trading of the Company’s common stock,” the company said in a statement.
Hyzon also said that its board of directors’ audit committee decided that its annual 10-K report for 2021 and 10-Q report for the first quarter of 2022 “should not be relied upon any longer.”
This is not all. Hyzon also said it had identified “operational deficiencies” at Hyzon Motors Europe BV, its European joint venture with Holthausen Clean Technology Investments BV. The company said the deficiencies would have a “material negative impact” on its ability to produce and sell vehicles.
The company said it now plans to restructure its European operations, and has retained a consulting firm to help reassess its global strategies and operations.
There’s more: The company said it entered into a share purchase agreement with Holthausen on May 5 to buy about 25% of the shares of Hyzon Motors Europe JV, which would have given Hyzon a 75% stake in the JV. This deal was expected to expire in July, but it didn’t.
“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 upon,” Hyzon stated. “The company and Holthausen are currently working on renegotiating the deal.”
Hyzon said it did not know when or even if a new share purchase agreement could be reached.
JPMorgan’s Peterson followed Hayson’s rating downgrade twice, to underweight from overweight, and to withdraw his stock price target. His previous target was $6.
Given all the disclosures, Peterson wrote in a research note that he now believes “investors are unlikely to give credit to the company for having strong core fuel cell technology and an undervalued hydrogen strategy, at least for the next several quarters.”
He also believes that Hyzon’s original “early engine advantage” in fuel cell electric vehicles (FCEVs) is now less likely given emerging competition, particularly in overseas markets in Europe and China.
Wedbush’s Dan Ives also downgraded Hyzon, to neutral from outperform, while lowering its stock price target to $3 from $7.
“There are more questions than answers at the moment with a myriad of issues identified in the file that we fear will slow Hyzon’s growth story (which has actually been progressing well for the past six months) with this black cloud now on the story, Ives Books.
DA Davidson’s Michael Schlesky cut his valuation to neutral from buy and his price target by two-thirds, to $4 from $12. He said the end result of the problems revealed could be as simple as a simple rework and improvement of the European process, or the changes could be more drastic.
“We simply don’t know where things are going at this point, and these kinds of investigations and restructuring actions can be expensive and distracting,” Schilsky wrote. “We are moving to the sidelines so we can have more clarity on these matters.”
The stock is down 56.1% year-to-date, while the S&P 500 SPX is down,
It lost 13.2%.