Hyzon Motors (HYZN) stock fell 28 percent on Sept. 28 after a short-sell report accused the company of fraud. Now, the stock trades at a significant discount to the SPAC IPO price of $10 and almost a third of its 52-week highs. What’s the forecast for HYZN stock and will it recover and go back up?
Short sellers seem to have a flair for green energy companies that went public through SPAC mergers. Hindenburg Research accused Nikola and Lordstown Motors of fraud, which led to the exit of the top management at these companies.
Blue Orca Capital's short-sell report on HYZN
Lordstown claimed that the CEO’s exit isn't linked to the short-sell report even though it admitted to some of the findings. Nikola’s founder, Trevor Milton, has been indicted by a federal jury on three counts of criminal fraud.
For a change, it isn't Hindenburg Research but Blue Orca Capital that has accused HYZN of fraud. Meanwhile, the core theme is more or less the same. Blue Orca has accused Hyzon Motors of fabricating its order book. It said that HYZN's largest customer seems like a shell company and was formed days before placing an order for 500 trucks.
The report also said that Hiringa, a New Zealand infrastructure startup that's the second-biggest customer for the company, is actually a channel partner and has no intention of taking the deliveries. It also accused the company of hyping relationships with big brands like Coca-Cola and Ikea in the initial days but then subsequently dropping them in future communications.
Is HYZN another Lordstown or Nikola?
Blue Orca also accused Hyzon Motors of providing 32 percent gross margin forecasts. However, discussions with former executives suggest that at best Hyzon can post a 10 percent gross margin. It also said that Hyzon Motors is a repackaging of struggling fuel cell company Horizon, which was delisted in 2021 at an enterprise value of only about $190 million.
Blue Orca pointed to the resignation of two CTOs in 15 months and termed Hyzon as the “Chinese Lordstown Motors.” Both Hyzon and Lordstown Motors are in the pre-revenue stage and the outlook depends on the success of unproven products and technologies.
How has Hyzon Motors responded to the allegations
Hyzon Motors said that it's carefully reviewing the report even though it “disagrees with the conclusions of the report, which it believes are based on a number of factual inaccuracies.”
HYZN stock forecast
The forecast for HYZN stock looks bullish, or at least that’s what analysts’ estimates tell us. All six analysts covering the stock rate it as a buy or some equivalent and the median target price of $19.50 implies that the stock could triple from these levels.
Will Hyzon Motors stock recover?
Hyzon Motors stock could recover some of the lost ground, which is typical after the massive fall on negative news. The stock was higher in premarkets on Sept. 29. Bargain hunters seem to be getting into the beaten-down stock. However, it soon turned negative.
What’s wrong with SPACs?
The debacles at Hyzon Motors, Lordstown Motors, and Nikola also raise doubt about the credibility of SPAC sponsors who earn millions through the mergers. While Hyzon hasn’t accepted or denied the allegations yet, the fact remains that at least some of the SPAC sponsors haven't been doing their due diligence properly.
Stable Road Acquisition (SRAC) is another case in point. Eve the SEC imposed a penalty on the company and merger target Momentus for misleading investors. With a flurry of SPACs hunting for targets and the universe of quality merger targets limited, these issues might keep cropping up.
Especially for pre-revenue electric vehicle companies, it's relatively easier to inflate the valuations by bumping up pre-orders. A few hundred non-binding pre-orders can inflate the company’s market cap by billions. Given the investor euphoria for green energy stocks, which has fortunately somewhat subsided, companies had all the incentive to bump up preorders.