Hyzon Motors Inc. shares suffered a record plunge toward a record low on Friday after the fuel cell truck maker disclosed “a host of issues,” including accounting irregularities, that will cause it to miss the filing deadline for its second-quarter results .
That prompted a number of analysts to backtrack from their bullish stances, including JP Morgan analyst William Peterson, who became the only bearish analyst on Wall Street.
HYZN, -38.08%, plunged 36.5% in very active afternoon trade on Friday, putting it on track for its worst daily performance since the ticker began trading a year ago. It was also heading for its lowest-ever close below the previous record low of $2.94 on June 30, 2022.
Trading volume rose to 15.6 million shares, compared to the all-day average of about 1.8 million shares.
The stock traded 65.5% below where it ended its first day of trading on the Nasdaq exchange on July 19, 2021 after its merger with specialty acquisitions company (SPAC) Decarbonization Plus Acquisition Corp. was completed.
Hyzon announced late Thursday in an 8-K filing with the Securities and Exchange Commission that it had opened 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 file its audited 10-Q by the August 15 deadline, meaning it will not meet Nasdaq’s listing requirements.
“The delay in filing will not have an immediate impact on the listing or trading of the Company’s common stock, although there can be no assurance that further delays in filing the Form 10-Q will not impact the listing or trading of the.” common stock of the company,” the company said in a statement.
Hyzon has also said that its board’s audit committee has determined that its 2021 annual 10-K and 2022 first quarter 10-Q “should no longer be reliable.”
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 it is now planning to restructure its European operations and has hired a consulting firm to help reassess its global strategies and operations.
What’s more, the company said it had already entered into a share purchase agreement with Holthausen on May 5 to buy about 25% stake in Hyzon Motors Europe JV, giving Hyzon a 75% stake in the JV. That deal was supposed to close in July, but it’s not.
“The Company and Holthausen were unable to complete the terms of the Holthausen transaction and the transaction is not expected to close on the terms originally agreed,” Hyzon said. “The company and Holthausen are currently working on renegotiating the transaction.”
Hyzon said it didn’t know when or if a new share purchase agreement could be completed.
Peterson of JP Morgan, followed by a double downgrade from Hyzon from overweight to underweight and the removal of its share price target. His previous target was $6.
In light of all the revelations, Peterson wrote in a research note that he now believes “investors are unlikely to give the company credit for having strong fuel cell core technology and an underappreciated hydrogen strategy, at least for the next few quarters.”
He also believes that Hyzon’s original “early mover 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 price target to $3 from $7.
“Right now, there are more questions than answers with the myriad of issues identified in the filing that we fear may confuse Hyzon’s growth story (which has actually progressed well over the past six months) with this black cloud that… now over history could slow down. ‘ Ives wrote.
DA Davidson’s Michael Shlisky cut his rating to neutral from buy and his price target by two-thirds from $12 to $4. He said the ultimate outcome of the disclosed issues could be as simple as minor restatements and improved European operations, 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 expensive and distracting,” Shilsky wrote. “We’re stepping aside until we have more clarity on these matters.”
The stock is down 56.1% year-to-date, while the S&P 500 index SPX is down -0.16%, down 13.2%.