• Earlier this month, Hyzon Motors or “Hyzon” reported Q1/2024 results, with revenues boosted by final customer acceptances for ten coach buses and one refuse truck in Australia.
• However, the company continues to burn cash at an alarming pace and will require a large amount of additional capital to continue executing its business plan.
• As a result, management was required to include a going concern warning into Hyzon’s quarterly report on form 10-Q.
• While the company is looking for strategic investors, a heavily dilutive equity raise or convertible debt offering looks like the most likely outcome at this point.
• Given elevated risk of substantial, near-term dilution, investors should consider selling existing positions and moving on.

Note:

I have covered Hyzon Motors Inc. (NASDAQ:HYZN, NASDAQ:HYZNW) previously, so investors should view this as an update to my earlier articles on the company.

Earlier this month, Hyzon Motors Inc., or “Hyzon” reported Q1/2024 results with revenues boosted by final customer acceptances for ten coach buses and one refuse truck in Australia:

However, the company continues to burn cash at an alarming pace and will require a large amount of additional capital to make it through next year.

As a result, management was required to include a going concern warning into Hyzon’s quarterly report on form 10-Q (emphasis added by author):

The Company has incurred net losses since inception. Net cash used in operating activities was $31.2 million and $46.0 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the Company has $52.4 million in unrestricted cash and cash equivalents, $30.2 million in short-term investments, and $6.0 million in restricted cash. The Company incurred net losses of $34.3 million and $30.3 million for the three months ended March 31, 2024 and 2023, respectively. Accumulated deficit amounted to $276.9 million and $242.6 million as of March 31, 2024 and December 31, 2023, respectively.

The Company has concluded that at the time of this filing, substantial doubt exists about its ability to continue as a going concern as the Company believes that its financial resources, existing cash resources, and additional sources of liquidity are insufficient to support planned operations beyond the next 12 months.

On the conference call, management stated its preference for strategic investors, but with the market for FCEV trucks still in its infancy and the company’s share price at all-time lows, it’s hard to envision prospective investors lining up in droves.

Similar to larger competitor Nikola Corporation or “Nikola” (NKLA), Hyzon is focusing on large fleet deployments:

However, this approach is likely to remain an uphill battle due to several key issues:

1. Extensive testing requirements.
2. Long decision-making processes, particularly when it comes to new technologies.
3. Ongoing lack of hydrogen infrastructure.
4. Concerns regarding the company’s financial viability.
5. Customers requiring the company to share into the financial risks associated with the new technology.

Particularly, the latter point is impacting the timing and treatment of revenue recognition in the initial phase:

For this year, the company is targeting 20 to 40 FCEV truck deployments, with the vast majority still running on Hyzon’s legacy 110kW fuel cell system.

However, the company will require additional capital to achieve these rather moderate targets, as outlined by management on the call:

By deploying a smaller number of trucks per fleet to priority large fleets, we are purposely managing working capital and associated net cash burn, while maximizing the commercial foundation we have in place to enable scaling in 2025 and 2026 noting that Hyzon is tied to progress in our strategic capital raise and may be adjusted pending outcomes this year. Lastly, we are focused on strengthening our balance sheet and securing additional capital to fund our business.

The company continues to target commercial production of its new 200kW fuel cell system in the second half:

But anywhere you slice it, Hyzon will require a considerable amount of new capital in the second half of this year in order to execute on its business plan.

Assuming quarterly cash burn of $28 million, the company will require more than $100 million to make it through next year.

Considering Hyzon’s market capitalization of $128 million, an outright equity raise would almost certainly result in massive dilution for existing shareholders.

While the company has no debt, there are no substantial assets either, so issuing secured debt won’t be an option.

However, similar to Nikola, Hyzon might be able to issue toxic convertible notes to specialized institutional investors but similar to an outright equity raise, this would likely require the company to secure shareholder approval for increasing authorized shares substantially above the current 400 million threshold as also outlined in the company’s quarterly report on form 10-Q (emphasis added by author):

The Company plans to improve its liquidity through a combination of equity and/or debt financing, alliances or other partnership agreements with entities interested in our technologies, and the liquidation of certain inventory balances.

If the Company raises funds in the future by issuing equity securities, dilution to stockholders will occur and may be substantial, and the Company may be required to seek shareholder approval for an increase in its authorized capital and issuance of equity securities. Any equity securities issued may also provide for rights, preferences, or privileges senior to those of common stockholders.

If the Company raises funds in the future by issuing debt securities, these debt securities could have rights, preferences, and privileges senior to those of common stockholders.

The terms of any debt securities or borrowings could impose significant restrictions on the Company’s operations. (…)

Given the Hyzon’s substantial cash requirements, lack of scale and the disappointing pace of FCEV truck adoption, I don’t expect the company to succeed in its search for strategic investors, particularly not when considering the fact that its largest shareholder and core IP provider remains Horizon Fuel Cell Technologies, a Chinese company.

Given these issues, I would expect Hyzon to come to market with some sort of equity-linked offering in the second half of the year and given the sheer amount required, major dilution appears to be in the cards.

Consequently, I would urge existing shareholders to consider selling their holdings and moving on.

Risks:

While the probability appears very low, a surprise strategic investment at favorable terms would likely result in the shares rallying quite meaningfully from current all-time lows.

Bottom Line:

To continue executing on its business plan, Hyzon Motors will require a substantial amount of additional capital in the second half of the year.

While management is looking for a strategic investor, I consider a heavily dilutive equity raise or sale of equity-linked securities as the most likely outcome at this point, as not even much larger competitor Nikola has managed to attract strategic investors in recent quarters.

With remaining liquidity depleting quickly, and additional funds required for planned vehicle deployments in the second half of the year, there’s elevated risk of substantial near-term dilution.

As a result, existing shareholders should consider selling their holdings and moving on.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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• Earlier this month, Hyzon Motors reported another zero-revenue quarter with sizeable cash burn eating further into the company’s rapidly deteriorating liquidity.
• While cash usage has decreased in recent quarters, the company will be required to raise a sizeable amount of additional capital by the second half of next year.
• The issue required Hyzon to include a going concern warning into the company’s quarterly report on form 10-Q.
• During the quarter, the company entered into a $25 million fraud charges settlement agreement with the SEC.
• Given the high likelihood of major dilution next year, I would strongly advise against an investment in Hyzon Motors Inc.’s shares at this point.

Note:

I have covered Hyzon Motors Inc. (NASDAQ:HYZN, NASDAQ:HYZNW) previously, so investors should view this as an update to my earlier articles on the company.

Earlier this month, Hyzon Motors Inc., or “Hyzon,” reported another zero-revenue quarter with a sizeable cash burn eating further into the company’s rapidly deteriorating liquidity:

While management celebrated another sequential decrease in cash usage and reiterated previously-communicated expectations for full-year 2023 and 2024 cash burn, Hyzon will be required to raise additional capital in the second half of next year at the latest point.

In fact, the issue required management to include a going concern warning in the company’s quarterly report on form 10-Q for the first time (emphasis added by author):

The Company has concluded that at the time of the filing, substantial doubt exists about its ability to continue as a going concern as the Company believes that its financial resources, existing cash resources and additional sources of liquidity are not sufficient to support planned operations beyond the next 12 months. (…)

The Company’s business will require significant funding to execute its long-term business plans. As of October 31, 2023, unrestricted cash, cash equivalents, and short-term investments were approximately $129 million.

The Company plans to improve its liquidity through a combination of equity and/or debt financing, alliances or other partnership agreements with entities interested in our technologies, and the liquidation of certain inventory balances. If the Company raises funds in the future by issuing equity securities, dilution to stockholders will occur and may be substantial. (…) If the Company cannot raise additional funds when needed or on acceptable terms, the financial condition, business prospects, and results of operations could be materially adversely affected.

On the conference call, management remained optimistic on the company’s ability to raise additional capital, particularly after a recent $25 million settlement with the SEC removed a long-standing overhang:

The Securities and Exchange Commission today announced settled fraud charges against Hyzon Motors Inc., an upstate New York-based company that builds hydrogen fuel cell electric vehicles (FCEVs), for misleading investors about its business relationships and vehicle sales before and after a July 2021 merger with a publicly-traded special purpose acquisition company, or SPAC. (…)

According to the SEC’s complaint, Hyzon misrepresented the status of its business dealings with potential customers and suppliers to create the false appearance that significant sales transactions were imminent. The complaint alleges that Hyzon also falsely stated that it had delivered its first FCEV in July 2021, even going as far as posting a misleading video of the vehicle purportedly running on hydrogen, when the vehicle was not equipped to operate on hydrogen power. The complaint further alleges that Hyzon later falsely reported that it sold 87 FCEVs in 2021, when in fact it had not sold any vehicles that year.

With the SEC investigation now behind the company, new management can focus on raising additional capital and executing on the company’s revised business plan.

In recent months, the company has taken measures to rationalize its global footprint, implement a shared service model for procurement and engineering and transition to third-party vehicle assembly.

The restructuring program is expected to be completed by the end of Q3/2024, very much in line with the anticipated production start of Hyzon’s new domestic fuel cell manufacturing facility in Bolingbrook, Illinois:

With less than $5 million in capital expenditures remaining, the new facility will provide annual capacity for the assembly of more than 700 of the company’s new 200kW fuel cell systems designed for Class 8 truck applications.

Subsequent to quarter-end, Hyzon completed its first fuel cell truck sale in the U.S., with revenue expected to be recognized in the current quarter.

The company also managed to revise terms of a legacy agreement with New Zealand’s TR Group for up to 20 truck upfits with Hyzon’s new 200kW fuel cell system:

The first two trucks are scheduled to be ready for commercial trial beginning in March 2024, and will be deployed for up to three months. Following the initial commercial trial, TR Group has an option to purchase the two trial trucks as well as to upfit another 18 trucks with Hyzon’s 200kW fuel cell systems to be assembled at Hyzon’s Melbourne, Australia facility.

Please note that Hyzon expects to generate a positive cash contribution margin at the truck level from vehicles delivered to large fleets going forward:

Following the deployment of fourteen vehicles under commercial agreements year-to-date, the company raised the low end of 2023 vehicle deployment guidance to 15-20 units from the original range of 10-20 units:

Last month, Hyzon amended its intellectual property agreement with affiliates of the company’s controlling shareholder, Horizon Fuel Cell Technologies (“Horizon”), to facilitate expansion into the stationary fuel cell power applications market:

Under the amendment, Hyzon expands its market access to stationary fuel cell power applications in North America, in addition to its existing access to global fuel cell mobility markets. (…)

Hyzon is targeting its existing fuel cell IP, production technology, and manufacturing facilities to commercialize stationary products, including near-term demand in end-use applications such as data centers, the entertainment industry, battery electric vehicle charging and remote industrial power needs. (…)

The amendment also covers the option for Hyzon and Horizon to pursue joint development of a single stack 300kW fuel cell system, which Hyzon previously announced as part of its product roadmap. (…)

As amended, the IP agreement will remain in effect until September 2030. This is intended to ensure both companies retain the flexibility to adapt to the evolving hydrogen ecosystem while building on the foundation of their collaborative efforts, and opening the global stationary power market outside of North America to Hyzon at that time.

However, expanding the company’s product offerings will require additional funds.

So far, management has abstained from providing the amount of capital required to achieve cash flow breakeven under the revised business model but with commercialization of the company’s Class 8 truck fuel cell offerings still hampered by customers requiring extensive trials and the availability of green hydrogen, it’s difficult to envision Hyzon scaling up production to required levels anytime soon.

While the company continues to have no debt, I would expect any near-term funding agreement to provide for the issuance of equity or equity-linked securities, very similar to competitor Nikola Corporation (NKLA).

Consequently, existing equity holders will likely have to prepare for major dilution next year.

Bottom Line:

While Hyzon Motors Inc. has reduced cash burn in recent quarters, the company’s remaining liquidity deteriorated to a level that raises substantial doubt about the company’s ability to continue as a going concern.

With commercialization of the company’s Class 8 fuel cell truck offerings still in its very early innings, I would expect annual cash burn to remain above $100 million going forward.

As a result, Hyzon Motors Inc. will be required to raise additional capital in the second half of next year at the latest point.

With no visible path to cash flow breakeven, the company won’t be able to access the traditional corporate debt markets, thus, leaving the issuance of equity or equity-linked securities as the only viable option.

Given the high likelihood of major dilution next year, I would strongly advise against an investment in Hyzon Motors Inc.’s shares at this point.

In fact, existing equity holders should consider stepping to the sidelines until the company has raised sufficient funds to execute on its revised business model.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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• Hyzon Motors Inc. reported another set of quarterly results without any product revenue recognition and sizeable cash burn.
• As of July 31, liquidity was down to $158 million. Based on management’s cash burn projections, Hyzon would be required to raise additional capital in H2/2024.
• Following the receipt of a previously undisclosed Wells Notice in June, the company has accrued a $22 million loss contingency to account for a potential settlement.
• Adding insult to injury, Hyzon also disclosed a new supplier lawsuit which has resulted in the suitor obtaining an attachment covering Hyzon Europe’s bank accounts.
• While market participants’ increased risk appetite has resulted in Hyzon recently regaining compliance with Nasdaq’s $1 minimum bid price requirement, I would strongly advise investors to avoid the shares until the company has raised sufficient capital to execute on its plans.

Note:

I have covered Hyzon Motors Inc. (NASDAQ:HYZN) previously, so investors should view this as an update to my earlier articles on the company.

Two months ago, I discussed Hyzon Motors Inc.’s recent efforts to revitalize the company following severe disruptions caused by short report allegations and a related SEC investigation as well as an internal investigation into revenue recognition, corporate governance, and internal control issues.

On Tuesday, August 8th, Hyzon released second quarter 2023 results and subsequently filed its quarterly report on form 10-Q with the SEC.

As it has been the case for several quarters now, Hyzon did not recognize any product revenue but continued to burn sizeable amounts of cash:

As of July 31, liquidity was down to $158 million. Based on management’s cash burn projections, the company would be required to raise additional capital in the second half of next year:

Keep in mind that expectations for cash usage do not include a likely, material settlement payment to the SEC following the previously undisclosed receipt of a Wells Notice in June (emphasis added):

On June 13, 2023, the Company received a “Wells Notice” from the SEC Staff, informing the Company that the SEC Staff had made a preliminary determination to recommend that the SEC file a civil enforcement action against the Company alleging violations of certain provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. (…)

Discussions with the SEC Staff regarding a potential resolution of the SEC investigation have been and remain ongoing. Based upon management’s assessment of the SEC investigation, the Company has accrued a $22.0 million loss contingency in the second quarter of 2023, of which $7.0 million is recorded in Accrued liabilities and $15.0 million in Other liabilities in the unaudited interim Consolidated Balance Sheets.

There is no assurance that this $22.0 million loss contingency will be adequate to resolve matters covered by the SEC investigation. (…)

The resolution of the SEC investigation or other regulatory proceedings could have a material impact on the Company’s liquidity and the Company’s ability to continue as a going concern if a significant monetary payment is agreed and paid or if the matter proceeds to litigation and a judgment is rendered against the Company.

Adding insult to injury, Hyzon also disclosed a new supplier lawsuit (emphasis added):

On July 28, 2023, Worthington Industries Poland SP.Z.O.O, a Hyzon Europe supplier, filed a complaint in the Amsterdam District Court in the Netherlands, against Hyzon Europe for breach of contract and obtained an attachment covering Hyzon Europe’s bank accounts. The complaint seeks damages from Hyzon Europe totaling €4.6 million (approximately $5.0 million in USD). The Company is awaiting receipt of the formal complaint from the Dutch court. The Company intends to vigorously defend itself against this claim.

On the conference call, management stated that it continues to work with a financial advisor on potential options for raising additional capital. However, considering the state of the company’s operations and current market environment, I am having a tough time envisioning Hyzon raising a material amount of new capital in a non-dilutive manner.

As a result, I would expect the company to pursue some sort of equity-linked offering in case market conditions improve sufficiently going forward.

Management also outlined a number of strategic initiatives to reduce cash usage going forward by limiting headcount growth, using contract manufacturers, consolidating fuel cell platforms and reducing excess inventory:

From an operational perspective, Hyzon continues to focus on executing on its recently revised business plan by preparing for the commercial launch of the company’s new 200kw single-stack fuel cell systems currently expected for H2/2024:

Bottom Line:

While new management has done a good job addressing a host of legacy issues and becoming current in the company’s regulatory reporting requirements, the company still lacks the capital to execute on its new business model even when considering a projected reduction in cash usage going forward.

Given the company’s stated intent to raise additional capital, investors will likely have to prepare for meaningful dilution going forward.

While market participants’ increased risk appetite has resulted in Hyzon recently regaining compliance with Nasdaq’s $1 minimum bid price requirement, I would strongly advise investors to avoid Hyzon Motors Inc. shares until the company has raised sufficient capital to execute on its plans.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Hyzon: More Capital Required To Execute On Amended Business Model – Sell appeared first on Up2info.com.

• On Thursday, Hyzon Motors reported first quarter 2023 results. While the company did not recognize any sales, cash burn remained substantial.
• The company has ceased commercial operations in China due to corporate governance concerns, margin issues and poor payment terms.
• Going forward, Hyzon will predominantly focus on its new 200kW fuel cell system for the trucking markets currently under development while employing an asset-light commercialization approach.
• At the current rate of cash usage, the company would be required to raise additional capital by mid-2024 at the latest point, assuming no major settlement payment to the SEC. Management has retained an advisor to assist with financing options.
• Investors will likely have to prepare for meaningful dilution and a potential reverse stock split later this year or in the first half of 2024 at the latest point. Even when considering market participants’ increased risk appetite in recent weeks, investors should avoid the shares for the time being.

Note:

I have covered Hyzon Motors Inc. (NASDAQ:HYZN) previously, so investors should view this as an update to my earlier articles on the company.

Last week, I discussed Hyzon Motors Inc.’s (“Hyzon”) recent efforts to revitalize the company and become current in its regulatory filings following severe disruptions caused by shortseller allegations and a related SEC-investigation as well as an internal investigation into revenue recognition, corporate governance and internal control issues.

In addition, the U.S. Attorney’s Office for the Southern District of New York recently notified the company that it is also investigating matters raised by the shortseller report.

On Thursday, Hyzon released first quarter 2023 results and filed its quarterly report on form 10-Q.

In addition, the company held its first earnings conference call in over a year and provided investors a new presentation outlining the company’s new business approach:

Going forward, Hyzon will predominantly focus on its new 200kW fuel cell system for the trucking markets currently under development while employing an asset-light commercialization approach:

As disclosed on the conference call, the company has decided to leave the Chinese market which is quite surprising given the fact that the company remains controlled by Singapore-based Horizon Fuel Cell Technologies PTE Ltd. (“Horizon”), an entity with significant business interests in China which has been the company’s sole fuel cell system supplier since inception (emphasis added by author):

As part of our restructuring assessment and related special committee investigation, we identified commercial governance concerns in our China operation, challenging our ability to operate commercially in China. Additionally FCEV profitability and collectibility in China has been significantly challenged versus the relatively attractive US, Europe and Australia-New Zealand markets on those fronts. This combination of economic and risk challenges led to our decision to exit China commercially to focus on our core markets. (…)

We exited the China commercial vehicle market in part due to the negative gross margin and extended payment terms.

As of today, we have not been successful in collecting the remaining outstanding balances from this customers. We also eliminated research and development programs in China, which were deemed not vital to our fuel cell or vehicle platform commercialization in the near term.

Earlier this week, Hyzon disclosed an agreement with Performance Food Group Company (PFGC) for upfitting 5 trucks with the company’s legacy 110kW fuel cell system and another 15 trucks upon successful trials of the new 200kW fuel cell system which underscores Hyzon’s new focus on large fleet customers:

As it has been the case for several quarters now, Hyzon did not recognize any product revenue but continued to burn sizeable amounts of cash:

As of May 31, liquidity was down to $185 million. At the current rate of cash usage, the company would be required to raise additional capital by mid-2024 at the latest point assuming no major settlement payment to the SEC.

On the conference call, management disclosed plans to proactively address the company’s funding needs (emphasis added by author):

Essentially, we are dual tracking our path forward. One, as Jiajia mentioned previously, we have identified additional cash management levers available to us which we are prepared to implement if necessary to extend liquidity balanced against impact to business execution plan, and two, working through strategic options to raise capital being structured or transaction agnostic at this stage as we evaluate these pathways.

To that effect, we have retained a financial adviser and have launched a structured strategic capital raise process proactively. We are currently in confidential discussions with a range of potential strategic counterparties that participate in prioritized segments of the hydrogen ecosystem, ranging from energy producers to technology and product-driven companies.

Current market conditions represent formidable headwinds to raising cash through public markets, not just for us, but for all publicly traded early stage growth companies. Our initial stages of engagement with the prioritized counterparties shows potential interest in Hyzon’s technology and execution plan combined with the value they see in potential joint offerings that our technology can stimulate.

Quite frankly, with the company apparently mostly back to development-stage and considering the current market environment, I am having a tough time envisioning Hyzon raising a material amount of new capital in a non-dilutive manner.

As a result, I would expect the company to pursue some sort of equity-linked offering in case market conditions improve sufficiently going forward.

Bottom Line

Kudos to Hyzon’s new management team for successfully addressing a host of legacy issues and becoming current in the company’s regulatory reporting requirements.

Unfortunately, more work remains to be done as the company lacks the capital to execute on its new business strategy and remains out of compliance with Nasdaq’s $1 minimum bid price requirement.

Given these issues, investors will likely have to prepare for meaningful dilution and a potential reverse stock split later this year or in the first half of 2024 at the latest point.

Even when considering market participants’ increased risk appetite in recent weeks, I would strongly advise investors to avoid the shares for the time being.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Hyzon Motors Inc.: Strategy Change And Major Capital Raise Ahead – Sell appeared first on Up2info.com.

• On Wednesday, Hyzon Motors Inc. filed its previously delayed annual report on Form 10-K with the SEC as part of its ongoing efforts to become current in its regulatory filings.
• Remaining liquidity is depleting quickly with cash and short-term investments down to $196 million by the end of April.
• At the current pace of cash usage, the company will have to raise additional capital by mid-2024 at the latest point.
• The company remains out of compliance with the Nasdaq’s $1 minimum bid price requirement. A reverse stock split later this year might be in the cards.
• With the stock price down almost 80% from the time of my last article, I am raising my rating by one notch but would continue to advise investors avoiding the shares.

Note:

I have covered Hyzon Motors Inc. (NASDAQ:HYZN) previously, so investors should view this as an update to my earlier article on the company.

Eighteen months ago, shares of emerging fuel cell electric vehicle (“FCEV”) producer Hyzon Motors Inc. or “Hyzon” were hit hard by a report from shortseller outfit Blue Orca Capital which essentially asserted the company being a sham.

Fellow contributor Stephen Tobin provided a short overview of the key allegations last year, readers looking for more detail should consider starting with his article.

While the company was quick to refute the report, the allegations not only resulted in multiple shareholder lawsuits and a SEC subpoena but also impacted the business quite meaningfully as stated in Hyzon’s 2022 annual report on Form 10-K filed with the SEC after Wednesday’s market close:

Because of these events, certain of the Company’s potential suppliers and partners indicated that they were suspending negotiations with us concerning supplying us with key components necessary to produce our vehicles. (…) The negative publicity stemming from this article has adversely affected our brand and reputation as well as our stock price which makes it more difficult for us to attract and retain employees, partners and customers, reduces confidence in our products and services, harms investor confidence and the market price of our securities, invites legislative and regulatory scrutiny, and has resulted in litigation and governmental investigations.

As a result, customers, potential customers, partners and potential partners have failed to award us additional business or cancelled or sought to cancel existing contracts or otherwise, directed or may direct future business to our competitors, and may in the future take similar actions, and investors may invest in our competitors instead of us.

On August 8, 2022 Hyzon disclosed an investigation related to “revenue recognition timing and internal controls and procedures, primarily pertaining to its China operations, that were brought to the attention of the Board by Company management”.

In addition, the audit committee determined that the company’s annual report on Form 10-K for the year ended December 31, 2021 and quarterly report on Form 10-Q for the period ended March 31, 2022 should no longer be relied upon.

Furthermore, Hyzon decided to withdraw “all financial and operational guidance it has previously issued for all periods, including for the year ended December 31, 2022 and subsequent years”.

The findings of the investigation were issued in March and resulted in the requirement to amend a number of quarterly reports as well as the company’s 2021 annual report on Form 10-K to reflect “adjustments to correct errors related to the recognition of revenue and associated balances for China FCEV transactions, adjustments to correct errors related to the recognition of revenue and associated balances for European FCEV transactions, and adjustments to its prior allocation of transaction costs incurred in connection with the Business Combination to reflect the allocation of the correct balance of Company incurred transaction costs between the liability classified earnout arrangement and the newly issued equity instruments in the Business Combination in the third quarter of 2021.”

In recent months, the company has filed a number of previously delayed quarterly reports followed by the 2022 annual report on Wednesday.

As shown in the table below, the company’s remaining liquidity is depleting quickly with cash and short term investments down by approximately $190 million year-over-year:

Based on disclosures made in Hyzon’s annual report, cash and short-term investments at the end of April were down to $196 million.

At the current cash burn rate, the company would be required to line up additional financing by mid-2024 at the latest point.

Not surprisingly, Hyzon’s annual report warns of the requirement to raise additional capital “in the near future“.

Please note that the company’s 2022 results missed previously stated expectations by a mile as the company only recognized a paltry $2.5 million in sales from the delivery of 62 FCEVs in China in the first quarter. Since then, Hyzon hasn’t recognized any vehicle sales as compared to the company’s original expectations for the delivery of up to 400 FCEVs in 2022.

In addition to the company’s ongoing efforts to become current in its regulatory filings, Hyzon has appointed new senior management and recently released a corporate presentation with the title “HYZON Revitalized” including a list of near- to medium-term commercialization milestones:

Lastly, the company expects to report Q1/2023 results next week with a conference call scheduled for 8:30AM EDT on June 8.

While I would expect the company to become current in its regulatory filings next week, Hyzon remains out of compliance with the Nasdaq’s $1 minimum bid price requirement. Despite the company having been provided the usual 180-day grace period until November 6, a reverse stock split later this year might be in the cards.

Bottom Line

While Hyzon Motors Inc. has appointed new management and is about to become current in its regulatory filings, the company’s remaining liquidity is depleting quickly.

At the current pace of cash usage, Hyzon will have to raise additional capital by mid-2024 at the latest point.

In addition, the company will likely require a reverse stock split later this year to regain compliance with the Nasdaq’s $1 minimum bid price requirement.

But with the stock price down almost 80% from the time of my article last year and shares trading below the company’s remaining cash and short-term investments, I am raising my rating by one notch from “Strong Sell” to “Sell“.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Hyzon Motors: Remaining Liquidity Depleting Quickly – Avoid appeared first on Up2info.com.

• Hyzon Motors Inc. will try to appeal their delisting on March 16th, and this is a major point of volatility for a company whose results we haven’t seen for a long time.
• With all the challenges of the current market, this is an unacceptable risk for any intelligent investor.
• At any rate, we are growing increasingly callous about hydrogen’s chances in a deglobalizing world and would avoid investing anywhere along the chain of hydrogen energy.

Hyzon Motors Inc. (NASDAQ:HYZN) is in principle an interesting company that produces its own hydrogen fuel cells focused on the truck markets with its proprietary hydrogen fuel cell technology. The problem is that, last we heard, Hyzon is burning cash. Moreover, it could delist from the NASDAQ, which would create some more forced selling. Finally, even longer term, we question whether hydrogen can be viable in a deglobalizing world.

Overall, Hyzon is not really an option for the intelligent investor. However, if there’s ever going to be a moment for Hyzon, it’ll have to be after the potential forced-selling event passes.

Delisting Situation

Hyzon Motors Inc. has not filed anything with the SEC since we last covered the stock. They are being notified of imminent delisting, but have managed to secure a hearing to appeal the incoming decision to delist them from the NASDAQ. This hearing happens on March 16th. The outcome is very much uncertain, and a delisting will create a lot more forced selling. Since they are owned by a couple of passive investment and exchange-traded fund (“ETF”) companies, this will likely lead to HYZN falling outside the scope of some of those companies’ mandates and result in it being sold. Forced selling will be very bad for the already shrunken HYZN stock price.

If the outcome of the hearing is good, it will mean that Hyzon Motors Inc. will be able to regain compliance along their presented plan and continue to be listed in the meantime.

More On Hydrogen

There are more concerns on hydrogen, which is how affordable it will end up being for vehicles. Specifically, we update our view with the worry about interactions with the state of global agriculture. In addition to our previous view that hydrogen infrastructure depends on PGM (platinum group metals) resources found primarily in Russia, the other concern is that the large amount of phosphate production in Russia, but also other countries like China who are needing to hoard it for food security reasons, may become more limited in the future for the benefit of the Western world. While relatively well-allied nations like Morocco can be trusted for their production for now, the increasing scarcity of fertilizer for the long term, especially where it is an exceptionally important geopolitical tool, is also a problem for hydrogen indirectly.

Firstly, hydrogen is used in the production of ammonia, which is a fertilizer that is an alternative to something that would come out of phosphorous-based production. Hydrogen prices could rise if they need to be directed more intensely to ammonia production. Conversely, some people have proposed that ammonia could be a useful source of hydrogen as well, since it’s easier to transport and has more infrastructure available. This would be a solution to the issue mentioned earlier about PGMs that might have been needed in hydrogen infrastructure. The problem is ammonia will be similarly expensive if phosphate fertilizers, a substitute end-product to ammonium nitrate, become more scarce. Therefore, the derived hydrogen will be more expensive.

Since food security trumps the need to decarbonize transportation and fertilizer looks to be an increasingly sore point for the global economy, investors in hydrogen ideas need to be careful of this situation eventually affecting the view on how practically viable hydrogen is for the consumer.

Bottom Line

The intelligent investor should not be playing games over a potential delisting, especially when it becomes truly likely. There is more downside here, for sure, if its marketability collapses following a delisting.

Moreover, in our last coverage, we noted the rapid cash burn. At the run-rate from then, which was a year ago now, they had about 3 years before they need capital markets again. Inflation will not have helped this number, neither will have any attempt made by the company to expand.

Without a solid position in the capital markets following a delisting, Hyzon Motors Inc. will be more marooned by an already tough venture environment. Pass.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

If you thought our angle on this company was interesting, you may want to check out our idea room, The Value Lab. We focus on long-only value ideas of interest to us, where we try to find international mispriced equities and target a portfolio yield of about 4%. We’ve done really well for ourselves over the last 5 years, but it took getting our hands dirty in international markets. If you are a value-investor, serious about protecting your wealth, our gang could help broaden your horizons and give some inspiration. Give our no-strings-attached free trial a try to see if it’s for you.

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• Nikola Corporation and Hyzon Motors Inc. kickstarted 2023 with uncertainty over their respective futures.
• Both FCEV truck companies have suffered huge drawdowns over the last 12 months and are trading closer to Nasdaq’s $1 minimum listing requirement.
• Whilst they both stand to benefit from significant government support, their respective liquidity positions are fast falling.

Nikola Corporation (NASDAQ:NKLA) slipped 10% last week Friday following its disclosure of a securities purchase agreement to sell up to $125 million in senior convertible notes. The Form 8-K provides more information on what looks to be an aggressive move by the Phoenix, Arizona-based FCEV (fuel cell electric vehicles) company to shore up its balance sheet and stave off the specter of a liquidity crisis. The notes will accrue interest at 5% per annum but come with a voluntary conversion clause that provides the noteholders with the option to convert all or any portion of their principal into common shares at the volume-weighted average price on or after January 9, 2023.

Nikola has essentially kickstarted its new year with dilution that amounts to 12% of its market cap to reignite angst over its future. The company’s cash and equivalents as of the end of its last reported fiscal 2022 third quarter was $320 million, but that was against capex of $51.1 million and negative operating flow of $157.6 million. The combined total of $208.7 million was a material increase from outflows of $118.3 million in the year-ago comp and highlighted how critical the situation is for Nikola.

Liquidity Gaps And Uncertainty To Kick Off 2023

Mirroring this uncertainty is Hyzon Motors Inc. (NASDAQ:HYZN), which faces February 13, 2023, as a deadline to file its long-delayed fiscal 2022 second-quarter earnings report. The Rochester, New York-based FCEV truck developer held cash and equivalents of $407.3 million as of the end of its last reported quarter, but this has likely been reduced to around $300 million following three consecutive quarters of total cash outflows running in parallel to their first quarter figure of $34 million. There is no indication that the company will file on time as shareholders stare at the very real prospect of their investment being delisted from the Nasdaq.

The company has continued to make operational progress, recently fully acquiring the remaining 1.485 million shares, around a 49.5% stake, in Hyzon Europe that it did not own for a total consideration of $5.84 million. Hyzon Europe was flagged by management for operational inefficiencies that were material enough to have an adverse effect on the company’s ability to produce and sell vehicles on the continent. Whilst it’s not quite clear if the investigation launched by its board of Directors into revenue recognition timing issues in China was extended to Europe, it’s odd for the new management, after the exit of ex-CEO Craig Knight, to push through with the acquisition of a unit without fully disclosing what the identified inefficiencies are and what remedies are being implemented.

The company currently trades at a market cap of $384 million, down from $2.8 billion when it went public and against an annualized revenue as per its last reported quarter of $1.6 million. However, leaning on any financials would be a somewhat meaningless endeavor, as its historical revenue recognition is structurally flawed. These numbers formed the basis by which it went public and the length of time it has taken the company to rectify the issue perhaps highlights the intensity of the headwinds it faces to correcting it.

Further, whilst bears would be right to state there is a visceral oddity in the company’s lack of communications, we do know that Hyzon has sold all its $3.1 million equity interest in Hyzon Guangdong to the controlling shareholder of the unit. The company again looks to be making a major policy decision without disclosing the outcome of investigations. The full exit and wind down of commercial truck sales in China is a big decision that drastically reduces the overall total addressable market Hyzon serves despite the company maintaining a China-based R&D and procurement unit.

This comes as the commons for Nikola and Hyzon are down by 78% and 76%, respectively, far below their initial $10 SPAC reference price. They both now face the very real prospect of moving below Nasdaq’s $1 minimum listing requirement, which would create an additional layer of uncertainty and the broadly unattractive proposition of a reverse stock split.

Both companies went public via blank check firms, Nikola in June 2020 and Hyzon just over a year later in July 2021. That both FCEV truck companies have ended up in a position characterized by marked uncertainty over their respective futures has likely tainted the fledgling FCEV industry and fundamentally rendered it less of a serious contender for the enthusiasm and broader hype that’s been extended to pure EV companies. Sales of heavy-duty FCEVs look likely to start to bloom as a number of models move from development to production over the next few years. This includes FCEV trucks being developed by Daimler Truck (OTCPK:DTRUY), Hyundai Motor (OTCPK:HYMTF), and Volvo Trucks (OTCPK:VOLAF).

Demand will also likely be majorly driven by several national and state government incentives. Indeed, Nikola is chasing a base incentive award of $240k per Nikola Tre FCEV from California’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (“HVIP”). The HVIP award can also be layered on top of the $40k in clean commercial vehicle tax credits from the Inflation Reduction Act. Hence, the company could realize a healthy jump in sales on the back of these financial incentives. Hyzon is approved to sell its FCEV trucks in California as it received certification from the California Air Resources Board in June 2022. This certification is the primary requirement for HVIP eligibility, which is still pending for Hyzon.

The Hydrogen Part Of The Climate Economy Is Stumbling

Assuming Nikola’s fourth quarter free cash outflow is reflective of the third quarter, the company’s new funding would see its cash position at around $237 million. Shareholders should hope its quarterly burn rate has collapsed because the current trajectory is not sustainable and would see a runway that would likely not extend past the summer of 2023.

This comes as Nikola’s average diluted shares outstanding have been skyrocketing to continue to offer shareholders dilution. No longer being a going concern is a very real risk for Nikola, and its commons will continue to reflect this. However, the company did lay off 7% of its headcount in September, around 100 employees. This is unlikely to be deep enough. Hence, the key difference between both companies is their runways. At its current rate of burn, Nikola is set to run out of cash by the end of the year, whilst Hyzon has more time. Hyzon also has more time if it meets the February deadline to wait for a possible market recovery to issue more shares to fund a ramp of its FCEV truck.

Nikola’s Tre FCEV semi-truck is expected to begin production in the second half of 2023 and then start its ramp in early 2024, whilst the Hyzon Class 8 Freightliner is already being delivered to customers. This has around 500 miles of range, refuels in 15 minutes, and has a high voltage 110 kWh battery energy. The Tre FCEV also has 500 miles of range and refuels in around 20 minutes. Hyzon is pushing a more asset-light approach and intends to only manufacture fuel cell powertrains while sourcing and assembling various parts from other suppliers. Nikola is underway with developing its Coolidge, Arizona, manufacturing facility, which it plans to scale to a production capacity of 20,000 trucks.

Ultimately, I think the climate economy will come to form one of the most attractive industries for investors over the next decade. It describes the companies that are building the infrastructure to facilitate the shift towards a global low-carbon future and hydrogen uptake has been placed as a critical enabler of this. Essentially, if we are to reduce and ultimately eliminate anthropogenic climate change, companies building FCEV trucks will have to execute their roadmaps. The International Energy Agency spells out a future where FCEVs are needed now to enable substantial emission reductions in the 2020s and 2030s.

The underlying structural policy demand drivers for FCEV truck adoption will continue to be healthy as to reach ambitious net-zero targets we will need to decarbonize heavy-duty trucking. The industry’s green credentials are dire with 38 billion gallons of diesel fuel consumed each year in the United States to form one of the fastest-growing sources of carbon emissions. Whilst I think both stocks are to be avoided, Hyzon could rally if it finally files its missing results, and Nikola could, too, if announces a new partnership deal.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Nikola And Hyzon Are Now In A Struggle To Survive appeared first on Up2info.com.

• Hyzon is a company that has its own hydrogen fuel cell technology and a production line in Illinois. It is receiving orders for trucks powered by its fuel cells already.
• Hydrogen has lots of advantages, and it’s an interesting prospect, but it is still challenged.
• The problem with Hyzon is that you can’t examine its filings because it’s stopped filing them with the SEC, as it apparently ‘burdens them unreasonably’.
• It’s possible they have insufficient internal controls and accounting.
• Picks like Hyzon are just not appropriate in the current environment despite the case for hydrogen. Avoid.

Hyzon Motors (NASDAQ:HYZN) is yet another renewable energy-based vehicle company trading on US exchanges. This one is focused on hydrogen, touting its fuel cell technology and assembly line in Illinois, as well as some credible orders from various companies who want to deploy hydrogen powered trucks in their fleet. They’ve done some test rides of trucks on their technology already and they seem to be fine, but the issue of broader hydrogen adoption is still an issue, as well as the green versus grey hydrogen problem, which goes unsolved and still relies on renewable energy. These are market level problems, but the issue with Hyzon is that in addition to an uncertain hydrogen future, it has stopped filing its 10-Qs and Ks with the SEC as of two quarters ago, causing sell-offs. While some recent co-investments with Chevron (CVX) are somewhat reassuring, we still don’t know their financials in a period where issues like cash burn are essential as capital costs rise. Hyzon is just not the kind of pick you want to look at in the current environment.

Our Notes on Hydrogen

Hydrogen depends on it being green for it to be an actual sustainable solution. Grey hydrogen ultimately solves nothing, as hydrogen production would be powered by non-renewable sources. Green hydrogen requires that renewable sources are effective enough on a large enough scale to produce hydrogen, which is then used in fuel cells to create power. Hydrogen is made through electrolysis, which requires electricity, and functions more or less as a reverse fuel cell, to be converted back into energy later in cars or wherever else.

There are myriad challenges here. Infrastructure to store and transport hydrogen are costly and mostly non-existent, and would rely on strategic resources like PGM metals that have the plurality of their reserves in Russia. Production of hydrogen will have to be near the uses of hydrogen, and that would have to coincide with regions where renewable energy production can also be sufficient to power green hydrogen production at all. If it’s not an area where the major sources of renewable energy can be useful, then green hydrogen production will still be costly even without the logistics effects. Things like waste-to-energy, part of the complex of solutions Hyzon are interested in as part of their vertical integration, could help out. The investment into Raven along with Chevron is part of this concept. The legitimacy lent to the venture by Chevron explains yesterday’s teen spurt in price.

Since hydrogen is much more energy efficient than other green sources for powering vehicles, conversion of green electricity into hydrogen should be sufficient in yield and theoretically effective. Still, cost is an issue, and would have to decline 80% to meet viability goals.

One intermediate advantage of hydrogen is that it increases the capacity factors of renewable installations by allowing peak production but perhaps periods of lower usage on the grid to be linked over time by the use of hydrogen fuel cells as energy storage.

Infrastructure related to storage and transportation is still a concern, and green hydrogen ultimately rests on renewable energy production, which is dawning on investors as likely a more marginal source of energy for the long-term than expected. However, less real estate would be required to supply hydrogen than with electric stations. The time it takes to charge is also solved by hydrogen, which was a capacity problem for battery powered vehicles.

Hyzon is focusing on the truck market, where electrification is more limited due to the necessary weight of the batteries, which would actually monopolize 20-30% of the payload a truck could carry. Also batteries don’t scale well in terms of cost relative to their physical size, and have reached the trough in terms of cost, now beginning to rise with supply chain and sourcing issues.

In general, hydrogen outperforms it in terms of fuel efficiency and is seen as a longer term solution.

Glaring Issues with Hyzon Motors

Moving on to Hyzon specifically, the first thing to note is that there is no Q2 or Q3 2022 presentation or SEC filing. They gave note of their late filing with the following reason.

When this first happened half a year ago, the stock tanked 40%. Continued late filing notices are a concern over internal accounting and control. We can also not track their cash burn, which is essential in the current market given costs of capital.

As of the last 10-Q given for the Q1, the cash burn was the following. They had started burning about $35 million per quarter. The company has about $400 million in cash as of last filing, so in about three years that cash would be gone at current run-rate. The thing is, the company had just started with trial trucks. Cash burn was likely inflecting upwards here, and is likely at a much worse run-rate. They could be running out of cash quickly, especially as they have to scale for the first dozen of orders they are getting from customers in Europe and elsewhere, after they pilot a dozen or so of their trial trucks. It could be until after Q2 2023 that they even start with commercial scaling, and with higher cash burns associated with early ramp-up and the current higher testing phase, there might be dilutions already in late 2023 of current shareholders.

We don’t know though, because we have no financials that are updated for after the Chinese and European economic woes, where initial market interest seems to have come from.

Bottom Line

The bottom line is that Hyzon is to be avoided. There is enough debate around the viability of hydrogen, but yet another bet on a renewable vehicle company would be among the many that have been ill-fated as of late for investors, especially in the current economic climate where financing has become a lot more expensive.

Shareholders will have to hope for a Fed pivot before equity raising would be necessary in order to save themselves from dilution. Reflexivity risks remain severe. HYZN should be avoided.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

If you thought our angle on this company was interesting, you may want to check out our idea room, The Value Lab. We focus on long-only value ideas of interest to us, where we try to find international mispriced equities and target a portfolio yield of about 4%. We’ve done really well for ourselves over the last 5 years, but it took getting our hands dirty in international markets. If you are a value-investor, serious about protecting your wealth, our gang could help broaden your horizons and give some inspiration. Give our no-strings-attached free trial a try to see if it’s for you.

The post Hyzon Motors Is Still Not Filing Its Reports appeared first on Up2info.com.

• Hyzon’s common shares are collapsing as the pre-revenue fuel-cell truck manufacturer struggles to find its footing on the public market.
• The company has still not issued its fiscal 2022 second quarter earnings report due to revenue recognition timing issues in China.
• Further internal discombobulation has been seen with its CEO departing as a deadline to regain NASDAQ listing compliance approaches.

Things were not meant to turn out this way for Hyzon (NASDAQ:HYZN). The Rochester, New York-based fuel-cell truck manufacturer laid out ambitious plans to ride the decarbonization of transport when it went public in the summer of 2021, but common shares have since collapsed on the back of public market investors who dialed the risk-off trade all the way up to dump shares en masse. This has seen the company fall from its go-public pro forma valuation of $2.7 billion to $453 million. Such a material change of fortune mirrors many of its climate economy peers, who also went public via the SPAC phenomenon. These golden days saw cheap stimulus money and low-interest rates drive asset values to stratospheric highs. It is all but dead as inflation spiked, and the Fed hiked rates in response.

Many shareholders have been asking what this means for the company’s mission to decarbonize heavy-duty trucking. This is an industry that consumes 38 billion gallons of diesel fuel each year in the United States and forms one of the fastest-growing sources of carbon emissions as eCommerce continues to boom. Further, the drive to decarbonization has become gospel to both private enterprises and the government. The latter has enacted the Inflation Reduction Act, set to be one of the most instrumental pieces of climate legislation ever, with at least $370 billion being earmarked for decarbonization initiatives to help reduce US greenhouse gas emissions to 50% below 2005 levels by 2030. Indeed, potential customers in the freight space like Deutsche Post AG (OTCPK:DPSTF), Amazon (AMZN), and United Parcel Service (UPS) all have targets to become carbon-neutral by future dates as part of their sustainability commitments. Hyzon’s public listing was meant to tap into this zeitgeist as well as do a few things on a corporate level.

Firstly, it was meant to raise the profile of its fuel cell trucks, which all have decent specifications. For example, the Hyzon Class 8 Freightliner has nearly 500 miles of driving range, a high voltage 110 kWh battery energy, and a 15- minute refueling time. Secondly, it was meant to help the company secure access to funds to bridge expected cash operating expenses and capital expenditures. The company was aiming to raise up to $570 million after expenses at the time it announced its SPAC transaction. This would come from a combination of PIPE funding of $400 million and money left in the trust of its SPAC backer after redemptions.

Hydrogen Fuel Cell-Powered Vehicles: The Future Of Commercial Transportation?

Hyzon’s Craig knight stated that the Nasdaq listing would “foster greater awareness that the future of commercial transportation, hydrogen fuel cell-powered vehicles, is today’s reality.” He is no longer with the company, pushed out two months ago on the back of several failures. The company’s last reported earnings were for its fiscal 2022 first quarter ending in March. The deadline to file the earnings report for its second quarter was missed and has still not been filled even as the third quarter earnings season is underway. This perhaps highlights the seriousness of the issue at hand. Management stated they were made aware of revenue recognition timing issues in China and have appointed a special committee to conduct an independent investigation to address these.

The problems in China were not the only issues flagged as Hyzon identified operational inefficiencies at its European joint venture with Dutch hydrogen company Holthausen. Whilst shareholders would have liked to see these issues clarified and resolved as quickly as possible, the company is yet to either publish the missed earnings report or report back from their investigation. This is an extremely difficult position for its shareholders to be in as Hyzon has received a non-compliance notice from Nasdaq over a failure to yet file its earnings and has up to 180 calendar days, or until Feb. 13, 2023, to regain compliance. Hyzon does hold cash and equivalents of $407.3 million as of the end of its first quarter. The company should have enough liquidity to see it through the turbulence, with a quarterly cash burn of around $30 million.

Hyzon Fights For Its Life

Hyzon set out a bright future where it contributed fully to the decarbonization of transport across the world and made expansion plans from North America to Europe and China to reach this. The company was going to reopen a General Motors (GM) former fuel cell facility in Rochester to produce systems for its trucks, had signed a deal to sell at least 500 of its Hyzon Hymax Series trucks to China, and had set up a European office in the Dutch city of Groningen.

It’s now unclear where these plans are. Such a material failure by management at such an early near formative stage for the company will put off investors and customers indefinitely even when compliance is regained. Fundamentally, the company is to be avoided until this is done.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Hyzon Is Fighting For Its Hydrogen Fuel-Cell Future appeared first on Up2info.com.