After learning of some red flags relating to its financials, investors are slamming on the brakes of Hyzon Motors (NASDAQ: HYZN). The developer of fuel-cell-powered electric vehicles was supposed to present its second-quarter 2022 earnings on Aug. 15, but the company announced it will have to delay the report. Several other items, meanwhile, are also motivating investors to click the sell button.
As of 10:07 a.m. ET, shares of Hyzon Motors have plummeted 39.8%.
After the market closed yesterday, Hyzon Motors announced it has “become aware of revenue recognition timing issues in China.” Consequently, the company has created a special committee that will partner with external advisors to investigate the matter, along with “other governance and compliance issues.”
In addition, Hyzon reported in a regulatory filing that its deal to acquire 735,000 shares of its stock from Holthausen Clean Energy Investments — a transaction that was expected to close last month — has been delayed. Hyzon no longer expects the transaction to close pursuant to the original terms of the agreement. The two companies are negotiating new terms, but it’s uncertain whether they’ll reach a new agreement.
Unsurprisingly, analysts are responding in droves to the news. For example, Michael Shlisky, an analyst at DA Davidson, cut his price target to $4 from $12, downgrading the stock to neutral from buy. Bill Peterson, an analyst at JPMorgan, took a more aggressive stance and downgraded the stock to underweight from overweight, providing no price target.
It’s little shock that investors are responding so emphatically to Hyzon’s announcement. Once investors detect a whiff of financial impropriety, confidence quickly erodes — especially with a growth company like Hyzon, where an ample amount of risk is baked into an investment.
Perhaps the most alarming indication of Hyzon’s precarious situation is that the company announced in its SEC filing that it was withdrawing all financial and operational guidance for 2022 and subsequent years. Investors are wise to distance themselves from Hyzon today and should continue to stay at arm’s length until the company’s governance issues are adequately addressed.