Why Hyzon Motors’ shares were crushed at the start of trading

What happened

Actions of the manufacturer of electric heavy goods vehicles Hyzon Engines (NASDAQ: HYZN) opened sharply on Wednesday after the company revealed it was the target of a Securities and Exchange Commission (SEC) investigation and said its revenue and margins for 2021 would be lower than its earlier forecast.

Hyzon shares fell more than 10% in early trading today, but rallied somewhat at 10:15 a.m. ET, when they were down about 5.6% from the Tuesday closing price.

Image source: Hyzon Motors.

So what

Hyzon said in a regulatory filing Wednesday morning that he received a subpoena from the SEC for documents and information related to allegations made by a short selling company in September.

The firm, called Blue Orca Capital, alleged in a September 28 report that Hyzon announced deals with clients who were in fact shell companies, inflated revenues and other financial projections prior to the merger. with a specialized acquisition company. who released it to the public in July, and that it was simply a repackaged version of a struggling Chinese fuel cell maker.

To be clear, these are allegations right now. But investors in electric vehicles will recall similar allegations by short sellers against Nicolas (NASDAQ: NKLA) and Lordstown Engines (NASDAQ: RIDE) turned out to be largely true. Both companies ended up firing their CEOs, and the shares of both companies were hit hard.

It is clear that the fear here is that Hyzon could turn out to be a similar situation. This is why the stock is down today.

Now what

While it is true that the Nikola and Lordstown cases did not end well, it is also true that the SEC document request was likely made with these examples in mind.

In other words, given what happened to Nikola and Lordstown, it’s no surprise that the SEC decided to take a closer look at Hyzon, just in case.

I am not a Hyzon shareholder. If I was, I wouldn’t be quite freaking out yet. But I will watch carefully, and you should be too.

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John Rosevear has no position in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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