By Sam Boughedda
Hyzon Motors Inc (NASDAQ:HYZN) shares plunged over 40% Friday following a filing by the company aftermarket Thursday that revealed the company's Board of Directors hired an independent outside counsel and other advisors to assist in an investigation into the company's China operations.
The announcement came as the second part of a press release stating the company had entered into a Stock Purchase Agreement with Holthausen Clean Technology Investments to acquire 735,000 shares of stock that Holthausen holds in Hyzon Motors Europe. It means the company's revised joint venture agreement with Holthausen is not expected to close on schedule, if at all.
The investigation into the company's operations, primarily in China, includes a look at revenue recognition timing and internal controls and procedures. As a result, the company said it will be unable to file its Form 10-Q for the June quarter on time.
Following the news, Hyzon shares were downgraded by analysts at D.A. Davidson and JPMorgan.
An analyst at D.A. Davidson downgraded the company's shares to Neutral from Buy, lowering the price target to $4 per share. "Management was unable to answer many questions given the ongoing nature of these issues, but we got the sense that revenue recognition in China was a question, as well as HYZN's ability to scale-up in Europe. While we don't think the issues are directly related to last year's largely-debunked short reports, these new matters typically result in significant expense and management distraction. We would prefer to focus on companies without such headline risk," he said.
A JPMorgan analyst downgraded the stock to Underweight from Overweight, withdrawing the firm's price target. "We downgrade Hyzon to Underweight as we think investors are unlikely to give credit to the company for having strong core fuel cell technology and an underrated hydrogen strategy, at least for the next several quarters. We think the latest news will revive questions on internal oversight and we would prefer to see evidence of better execution on the product and go-to market side, as well as with the company’s financials," said the analyst.