Hydrogen electric fuel cell vehicle manufacturer Hyzon Motors has strongly rejected a short seller report published by investment firm Blue Orca that caused its share price to fall by more than 20pc in a day at the end of last month.

Blue Orca published a report saying it was short Hyzon Motors, and accused the firm of mis-representing the nature of its deals with China’s Shanghai Hongyun and New Zealand’s Hiringa.

“The self-serving short seller report published by Blue Orca last week is inaccurate and misleading, and we believe it was intended solely to generate profits on Blue Orca’s short position at the expense of Hyzon’s long-term shareholders,” says Hyzon’s Craig Knight.

Blue Orca also raised concerns around Hyzon’s projections on gross vehicle sales and the fact that two chief technology officers (CTOs) have left the firm in 15 months. It claims to have spoken to former senior executives who said they were uncomfortable with Hyzon’s projections. The executives were not named.

Shanghai Hongyun

Hyzon announced in September that it had signed a deal with Shanghai Hydrogen Hongyun Automotive Company.

Under the non-binding memorandum of understanding, the firm said an initial order of 100 vehicles was to be placed before the end of 2021, while the other 400 vehicles would be ordered in 2022.

“This makes Shanghai Hongyun by far one of Hyzon’s largest near-term customers,” the Blue Orca report noted.

500 – Vehicles referenced in Shanghai Hongyun announcement

“For a commitment of that size, we would typically expect the counterparty to be a deep-pocketed and well-established logistics company with sufficient operating footprint, infrastructure and track record to purchase and deploy 500 new hydrogen-fuelled trucks.”

The report continued: “But when we looked up Shanghai Hongyun on China’s National Enterprise Credit Information Publicity System, we found that Shanghai Hongyun was established only three days before Hyzon announced the deal.”

Blue Orca says it checked all the companies associated with Kou Jian, the 95pc owner and legal representative of Hongyun, and Zhong Dequan, the 5pc owner of Hongyun.

“All the companies appear to be small. Many of them have no active website or WeChat account and had no more than five employees as of 2020,” it said.

In its response statement, Hyzon says it was clear the memorandum of understanding was non-binding and that Shanghai Hongyun was not yet one of its customers.

It added that it still expects to receive binding purchase orders from Shanghai Hongyun for the vehicles, which it anticipates will include upfront deposits and instalment payments.

“Hyzon expects to provide additional updates on its work with Shanghai Hongyun and the Chinese market in the near future,” the statement says.

Hiringa

In February 2021, Hyzon announced that it had signed an agreement to build and supply 1,500 hydrogen-powered vehicles for New Zealand firm Hiringa.

Blue Orca’s report says it spoke with a Hiringa executive who said the firm was a “channel partner”, meaning it facilitates the sale of trucks to third parties but was not a buyer itself.

“This is not a matter of semantics. According to Hiringa, it has no current intention (or funds) to purchase 1,500 trucks from Hyzon, but merely to act as a conduit to encourage other New Zealand heavy truck operators to purchase trucks from Hyzon,” said the Blue Orca report.

In its response statement, Hyzon said it had never suggested that Hiringa was an end-user of hydrogen trucks. 

“Instead, as Hyzon explained in its 17 February press release, the partnership between the companies is intended to accelerate the decarbonisation of heavy transport in New Zealand through the buildout of hydrogen infrastructure and the supply of fuel cell electric trucks and buses,” the statement said.

The press release remains on Hyzon’s website and states the two firms “have signed a vehicle supply agreement” without specifying whether Hiringa was to be an end-user. It does not mention the supply of vehicles to any third parties.

Projections

Citing an interview with a former Hyzon executive, the Blue Orca report said that Hyzon’s  forecasts that its gross profit margins on electric vehicles will be 32pc in 2021—and reach as high as 33.6pc by 2025—are inaccurate.

“The self-serving short seller report published by Blue Orca last week is inaccurate” Knight, Hyzon Motors

“We spoke to a former executive from Hyzon who indicated that Hyzon’s retrofitting model of production would yield no more than 5-10pc gross margins,” the report said.

These claims are “baseless”, according to the Hyzon response.

“As previously disclosed, Hyzon is developing core fuel cell powertrain technologies which include fuel cell, hydrogen storage, battery, e-axle, and integrated controllers to electrify commercial vehicles, all of which Hyzon expects to justify attractive margins,” the firm says.

Chief technology officers

The Blue Orca report said it was undisclosed to investors that Gary Robb was Hyzon’s second CTO to resign since the company’s inception in January 2020. Robb himself retired last month and was replaced with Shinichi Hirano.

“Hyzon’s first CTO—Ian Thompson—lasted just five months in the role before resigning in June 2020,” Blue Orca said. “That makes two CTO resignations for Hyzon in 15 months, even though the company was only formed in January.”

Hyzon says the claims are misleading.

“Ian Thompson was never an employee of Hyzon and only served as an interim CTO in his capacity as a consultant to Hyzon’s then-parent company for several months,” the company says. “Gary Robb remains a valued member of the Hyzon team following his retirement through an ongoing consulting relationship with Hyzon, and he retains substantial holdings in Hyzon stock.”

Hyzon says it does not intend to make any additional public comments on the Orca report though it  added it intends to “vigorously defend” the company and its shareholders.

---

Author: Tom Young