Pass on Hyliion Holding Corp.’s Shares for Now

Investors looking to anticipate trends are eyeing the switch to electric vehicles with interest. Big-rig trucks are part of the electric game,  and Hyliion Holding Corp. (NYSE:HYLN) wants to be a player in that sector. But hold onto your money; it’s not time to buy shares of Hyliion stock.

A 3D rendering of a green truck in front of a blue sky.
Source: Shutterstock

A great deal of investors’ attention is aimed at electric-vehicle manufacturers and their cool-looking cars and SUVs. This is understandable. Names like Tesla (NASDAQ:TSLA) are very recognizable, and not only because electric vehicles are sleek, but also because they perform well. Elon Musk’s spirited drive pushed his company to be a successful pioneer, paving the way for other companies.

Clearly, not all of the EV wannabes will survive. The auto business is brutal. Plus, the larger, established automakers aren’t putting out the welcome mat for competitors, either.

Aiming for a Different Target

There are other areas of the electric-vehicle market that appear ripe for picking. A significant one is hiding in plain sight on streets and highways across this nation – and even the world. That is tractor-trailer rigs.

These massive machines play a key role in the economy, hauling goods nearly everywhere. Trucking handles the food we eat, the clothes we wear, the vehicles we drive and basically everything else. When we are done, trucks haul away all the stuff we throw away.

While we enjoy all these goods, some negatives tag along for the ride:

  • Big rigs discharge polluting emissions into our air. I readily admit today’s rigs run cleaner than older models, but their exhaust contributes to air pollution.
  • Moreover, big rigs  consume a lot of fuel.

Both of these negatives can be offset, at least partially, with emerging technologies. There is a two-pronged approach developing. The first proposes to convert existing fleets to a hybrid system, with the goal of reducing pollution and increasing mileage. And the second seeks to develop trucks powered by batteries or other alternative fuel sources, such as hydrogen cells.

The acceptance of hybrid and battery-powered autos has taken root in the United States and elsewhere, especially in areas with very serious air pollution, such as China. Unfortunately, although there have been a handful of prototypes (including one from Tesla), the alternative-power trend is taking longer in the trucking segment.

A Look at Hyliion Holding

Hyliion, based in Cedar Park, Texas, is marketing a hybrid-power system for Class 8 trucks, the “tractor” in what we refer to as tractor-trailer rigs. The company says its hybrid system can boost mileage by notable percentages. This accomplishment will cheer an industry that’s forced to spend huge amounts of money on fuel.

There are critics who doubt Hyliion’s assertions and have blasted the company. This criticism comes after doubts circulated about other EV companies, causing downward pressure on their stocks.

It doesn’t help that Hyliion stock, odd spelling and all, reached the market via a reverse merger with a special purpose acquisition company (or SPAC). Investors following the EV trend are familiar with SPACS, as they were used by several electric-vehicle companies to go public.

This method is not respectable. It is a shortcut that avoids requirements imposed to protect investors. You know, little things like capitalization. I believe comparatively few SPAC mergers will survive the harshness of reality. Investors, tired of exaggerated risks and losses, eventually will avoid them.

Hyliion Holding completed its reverse merger in September. The shares of Hyliion stock, which surged about that time, turned south and collapsed in October.

Several of my InvestorPlace colleagues are wary about Hyliion stock. For example, Thomas Niel recently cited the stock’s “epic decline” and wrote that investors should steer clear of Hyliion.

The Bottom Line on Hyliion Stock

There are many reasons to be very cautious regarding SPAC companies in general and Hyliion stock specifically. Perhaps Hyliion has developed the product that could advance the alternative-fuel initiative and strike goal. But the odds of that are long and its competition is fierce.

Investors interested in this slice of the market can find more suitable companies. If, after due diligence, you think Hyliion stock holds potential promise, then a wait-and-see approach is warranted.

On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.

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