Hyzon Motors (HYZN 3.95%), a maker of heavy trucks powered by hydrogen fuel cells, disclosed in a regulatory filing on Jan. 12 that it has received a subpoena from the U.S. Securities and Exchange Commission (SEC) for information related to a short-seller's allegations.
Hyzon also said that while its 2021 deliveries slightly exceeded its forecast, its full-year revenue and margins will come in "materially lower" than its previous guidance.
Shares were down sharply in early trading after the news was released.
Hyzon delivered more of its fuel cell-powered heavy vehicles in 2021 than expected. But revenue and margins will both fall short of guidance, it said on Jan. 12. Image source: Hyzon Motors.
About that SEC subpoena
Hyzon didn't say much about the subpoena. In a terse 8-K filing, it said that it has received a subpoena from the SEC for "documents and information, including related to the allegations made in the report issued by Blue Orca Capital."
That report from Blue Orca, issued on Sept. 28, 2021, made some heavy allegations. Among them: that Hyzon's financial projections are inflated and unrealistic, and that at least one of the large orders announced by Hyzon last year came from what appears to be a shell company.
Of course, short-sellers make accusations all the time. But the electric vehicle segment has a rough history with short-seller reports that turned out to contain some truths, as any Nikola or Lordstown Motors shareholder can tell you.
Given the history around those companies, I think that EV investors are right to be concerned about the news that the SEC is investigating Blue Orca's allegations.
Hyzon also warned on its 2021 results
There's an old public-relations adage: If you have more than one bit of bad news to announce, announce it all at once.
Presumably heeding that advice, Hyzon also gave investors a preview of its 2021 results. The good news is that Hyzon delivered 87 fuel cell powered heavy-duty vehicles in 2021. Those were all sales, not leases, it said. (Commercial fleet operators sometimes rent a vehicle for a few months of testing; those deals are called "trial leases." Hyzon had eight trucks deployed under trial leases in 2021 in addition to the 87 total.)
Hyzon had said last February that it expected to deliver 85 vehicles in 2021, so 87 deliveries is a small beat.
But the deeper news wasn't good. The company said that because of "lower average selling price per vehicle due to product mix and multi-year revenue recognition for the majority of sales," its 2021 revenue and margins will be worse than it had expected.
In other words, Hyzon's 2021 financial results will fall short of its guidance, despite the deliveries beat.
What it all means for Hyzon investors
My take is that the financial "miss" doesn't really mean much. Supply chain challenges and other COVID-19 effects made 2021 a difficult year for any company manufacturing vehicles. Hyzon is a young company and things didn't go as expected. If it continues to execute on its plan in 2022, this "miss" will be forgotten.
The SEC investigation also doesn't mean much right now, though as I said above, investors are right to be concerned. Given the history around companies like Nikola and Lordstown, it shouldn't be surprising that the SEC is taking closer looks at other companies that have been the targets of short-seller reports.
If you've done your due diligence and you're satisfied you understand the risks and potential rewards of holding Hyzon's stock, I don't see a big need to sell right now on this news. But do keep an eye on that SEC investigation.
