What happened
Shares of electric heavy truck maker Hyzon Motors (HYZN 3.85%) were trading sharply lower for a second day on Wednesday, after a Wall Street analyst downgraded the stock following yesterday's news of an SEC investigation.
As of 12:15 p.m. ET, Hyzon's shares were down about 8.7% from Wednesday's closing price.
So what
Hyzon's shares closed down almost 11% on Wednesday, after the company revealed that it had received a subpoena from the U.S. Securities and Exchange Commission (SEC) for documents and information related to allegations by a short-seller. (It also warned that its 2021 financial results will fall short of its guidance.)
The short-seller, Blue Orca Capital, had issued a report in September that alleged Hyzon had announced deals with customers that were actually shell companies and inflated its financial projections.
Image source: Hyzon Motors.
A subpoena is simply a formal, legal demand for information and documents. It doesn't mean that Hyzon engaged in any wrongdoing. But given the history of similar short-seller allegations against other EV companies like Nikola and Lordstown Motors, I said yesterday that electric-vehicle investors were right to be concerned.
Wall Street is concerned, too. In a new note on Thursday morning, Colliers analyst Donovan Schafer downgraded Hyzon's shares to neutral from buy and withdrew his prior $15 price target. While acknowledging that the subpoena is in no way proof of guilt, he recommended that investors move to the sidelines until the uncertainty raised by the SEC's move is resolved.
Now what
Hyzon issued a lengthly statement in October that refuted the claims made by Blue Orca in its report. That was the right response, and that might have been the end of matter -- but the SEC's decision to investigate has resurrected investors' concerns, for obvious reasons.
It's worth keeping in mind that the SEC's decision to investigate might be nothing more than due diligence, understandable in the wake of the Nikola and Lordstown messes. But I suspect that Hyzon's shares will remain volatile until we find out for sure.
