After recently going public through a special purpose acquisition company (SPAC), Hyliion (NYSE:HYLN) garnered attention as a new entrant in the up-and-coming zero-emissions transport sector. In a very short time, Hyliion stock has produced gains for nimble traders and losses for ill-timed investors.
In a deal worth more than $500 million, Hyliion came to the market through a merger with a shell company, Tortoise Acquisition. This happened amid a flurry of SPAC deals in the electric vehicles space.
Yet, interestingly enough, Hyliion doesn’t produce cars or trucks. Rather, the company produces electrified powertrain (a.k.a. drive train) solutions for Class 8 commercial vehicles.
So, at least Hyliion has a different angle within what might be considered an overcrowded market.
On the other hand, the Hyliion stock price has been in a state of decline lately. What might have caused this, and should investors be concerned?
Let’s explore the rise, fall and hopefully, the imminent comeback of an exciting green-energy disrupter in the making.
A Closer Look at Hyliion Stock
Hyliion stock, which was formerly SHLL stock, once traded at around $10 per share. October has been such a rough month for Hyliion’s shareholders that the stock might actually make a round trip back to $10 this year.
That might sound like an exaggeration, but there’s no denying that Hyliion stock is prone to outsized price moves. From June to early September, the stock surged from around $10 to a 52-week high of $58.66.
Investors in Hyliion stock were then subjected to choppy price action in September, followed by a steep decline to the $19 level in October. Can the bulls possibly stage a turnaround at this point?
Anything’s possible as many newly listed stocks have made outsized price moves before finding a sustainable range.
Just be advised that volatility is the norm in recent SPAC stocks. Moreover, that volatility can escalate quickly when they’re associated with the electric vehicle market.
What Tanked This Stock?
I searched high and low for a reasonable explanation as to why Hyliion stock fell so sharply in October. As far as I could tell, there wasn’t any terrible news event that was specific to the company during this time.
I suspect that Hyliion stock holders in October were victims of what I would call the Nikola (NASDAQ:NKLA) effect.
In late September, Nikola founder and Executive Chairman Trevor Milton resigned amid allegations that he had made false claims about his company’s technology.
As you might expect, this unfortunate development precipitated a steep decline in Nikola stock. And there’s a phenomenon in the world of trading in which people will dump their shares of a stock when a similar stock tanks.
Nikola’s involved with electric trucks, and so is Hyliion. Nikola merged with a SPAC, and so did Hyliion. These are superficial similarities, but I suppose they were enough to convince skittish traders to hastily abandon their Hyliion shares.
The Perfect Product
Yet, the trading community should understand that Hyliion is not Nikola. While Nikola manufactures electric trucks, Hyliion is more of a picks-and-shovels type of company.
By that I mean Hyliion offers a product that the main competitors in the electric vehicle space will need. Trucks need drive trains, and if electric vehicle manufacturers want to be truly carbon-neutral, Hyliion’s got the perfect product for them.
That perfect and entirely unique product is known as the Hypertruck ERX. It’s a powertrain that runs on renewable natural gas. With this, electric vehicles can go from carbon-neutral to net-carbon-negative.
If you’re wondering whether the clean-energy market is ready for this level of disruption, note that renewable natural gas is already available in over 700 commercial vehicle filling stations in North America.
And for trucking aficionados, be advised that the Hypertruck ERX system provides for an estimated range of over 1,300 miles between fill-ups.
Thus, range need not be an issue for clean-energy automakers with this innovative drive train.
The Bottom Line
Oddly enough, traders might have punished Hyliion stock for Nikola’s perceived sins. If anything, this presents an opportunity for risk-tolerant investors.
Hyliion’s value proposition derives, in large part, from the company’s unique product offering. The Hypertruck ERX system is super-clean yet powerful. So, as far as picks-and-shovels plays go in the electric vehicle space, Hyliion stock is in a class of its own.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.