Short Selling

Hedge Funds Ramp Up Their Short Bets on Hyzon Motors Inc (HYZN:US)

Hyzon Motors Inc
(HYZN:US)
12 months:
-52.58%
Activity:
Bearish
Pattern:
Rising short interest
News:
Q1 results
Hyzon Motors Inc
(HYZN:US)
12 months:
-52.58%
Activity:
Bearish
Pattern:
Rising short interest
News:
Q1 results

Short selling data can provide powerful insights for investors. If a stock has a high level of short interest, it can indicate that there’s significant risk to the downside.

In this report, we are going to examine the short interest data on Hyzon Motors Inc (HYZN:US). Hyzon is a hydrogen mobility company that came to the market last year through a SPAC deal. Headquartered in Rochester, NY, it is engaged in the development of zero-emission hydrogen fuel cell powered commercial vehicles, including heavy duty trucks, buses, and coaches. The company is listed on the Nasdaq and currently has a market capitalization of $912 million.

Hyzon Motors: Short Interest Data

Looking at the latest short interest data on Hyzon, we see two major red flags right now.

The first is that short interest is very high. At present, 26.7 million shares are on loan, representing about 29.9% of the free float. This indicates that many sophisticated investors are bearish here at present. It’s worth noting that utilization – a measure of demand from short sellers – is 100%, which indicates that demand for the stock on the short side is very high.

The second red flag is that the number of shares on loan has risen significantly recently. When we last covered Hyzon, in November last year, just 9.7 million shares were on loan. Since then, the figure has risen by around 180%. This large increase tells us that the short sellers have been ramping up their downside bets here. Since our last article on Hyzon, the share price has fallen from $7.60 to $3.68. The short sellers clearly believe it’s set to fall further, however.

Why Are Short Sellers Targeting Hyzon Motors?

As for why institutions are shorting Hyzon right now, it’s most likely down to a lack of profits and a high valuation.

This year, analysts expect the group to generate sales of $64 million and a net loss of $86 million. In the current environment, in which there’s a high level of economic uncertainty and the cost of capital is rising, investors don’t have a lot of time for companies with these kinds of financials.

Meanwhile, the valuation remains elevated, even after a big share price fall over the last year. With sales of just $64 million forecast for this year, the price-to-sales ratio here is about 12.4. That seems high, given the company’s poor financials.

The short sellers may also be skeptical about the company’s growth potential. In March, Hyzon cut its forecast for 2022 deliveries to 300-400 vehicles, down from 500-700 vehicles.

It’s worth noting here that last year, Hyzon was the subject of a scathing report from short seller Blue Orca. In its report, Blue Orca stated that Hyzon’s financial projections were unrealistic, its largest customers were fake, and that orders were overstated.

Whatever it is the short sellers are looking at here, we think caution is warranted towards the stock. We see the high, and rising, level of short interest as a bearish signal.

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