Some company-specific headwinds are adding to a general market downturn in these electric vehicle names.
Key Points
- Nio recently surpassed third-quarter delivery guidance even during a challenging supply environment.
- Workhorse and Hyzon are battling several issues ranging from a recall to questions about the validity of customers, respectively.
What happened
With the general markets approaching correction territory, stocks in the more aggressive electric vehicle (EV) sector are facing stronger headwinds than many others. That continued today, with shares of Chinese EV maker NIO Inc., start-up Workhorse, and hydrogen fuel cell EV company Hyzon Motors Inc. all declining. At the lows of the day, the stocks of the three companies were down 2.1%, 10%, and 11.4%, respectively. By market close, they had rebounded some, with Nio finishing 0.62% down, Workhorse lower by 9.3%, and Hyzon almost 8% lower.
So what
Of the three, Nio has actually had some good news recently, with stronger-than-expected third-quarter vehicle deliveries and news of progress in its expansion into Europe. But Workhorse and Hyzon both have been hit with negative news, with the market reacting accordingly.
For its part, Workhorse reported a flurry of executive changes last week as the company seeks to recover from apreviously announced truck recalland temporary suspension of ongoing production. Additionally, the company today reported a securities exchange agreement that will result in shares being given to two existing convertible notes holders at a price between $6 and $8.50 per share. That compares to the more than $9 share price where the stock was trading just one month ago.
Hyzon has a different sort of challenge. On Tuesday, the company responded to a short-seller report that was issued on Sept. 28. Blue Orca Capital, whichholds a short position in the stock, questioned the validity of Hyzon's customers and accused it of seeking to "enrich insiders by repackaging an old technology in a fig leaf of misleading deal announcements and illusory customer contracts."
In its response, Hyzon called the report inaccurate and misleading, pointing out that Blue Orca stands to gain financially if it helps drive the stock lower. In responding to the accusation that the company overstated its relationships with certain customers, Hyzon said, "Like any innovative company in a nascent industry, Hyzon continues to pursue a wide range of potential opportunities, any one of which may or may not ultimately result in a commitment to purchase vehicles from Hyzon." It rejected all implications that its business is anything other than what it has portrayed publicly, and said it will defend the company against such accusations.
Now what
It's not surprising that the stocks of even more established EV businesses like Nio are volatile. That company is growing, but it has yet to reach profitability, and investors have valued it aggressively, with about a $55 billionmarket capat its recent share price. Workhorse has to work through its production issues, and Hyzon is still pre-revenue. Until they show evidence of a steady and growing business, investing in these stocks amounts to nothing but speculation. Some investors who perform their own due diligence still might want some of that in a portion of their portfolio, however.