There’s an argument circulating that there’s more reason than ever to buy Hyliion Holdings (NYSE:HYLN) stock. After all, share prices are just about as low as they’ve ever been in the short time since the company was taken public via a SPAC reverse merger in September of last year.
So, bullish logic would dictate that now is a by-the-dip opportunity. The promise then would be that enthusiasm for everything EV reignites, and Hyliion proves its mettle as a business. However, that’s not an argument I’d suggest investors follow.
The fact is that EV enthusiasm isn’t what it once was. However, Hyliion’s problems originate within the company, not simply its sector. I personally have never thought Hyliion was an attractive investment, and that hasn’t changed.
HYLN Stock: SPAC Hangover
Investors have to realize that Hyliion was always a speculative investment. Part of the reason that so many EV companies came public via the SPAC route was that the timing was perfect. EVs gained a strong foothold in 2020 and investors treated everything EV related as if it could do no wrong.
SPACs require less stringent vetting requirements than the traditional IPO process does. That meant that riskier companies could go public. The point here is that all of the risky SPAC EV plays that were overbought in 2020 are showing their true colors.
Perhaps it actually isn’t that they’re showing their true colors, but rather that markets are more properly understanding companies like Hyliion.
What that really means is that potential investors are taking much more time looking at the numbers behind Hyliion. And the truth is, they don’t like what they see.
HYLN Stock: Financial Situation
Hyliion remains a pre-revenue company. The byline of reported sales in 2019 which read “NA” remained “NA” in 2020. So while Hyliion was able to raise $520 million as a result of the SPAC business combination, not much has come of it.
The company’s net loss of $14.1 million in 2019 increased to $39.2 million in 2020. Probably not a big in the grand scheme of things considering again that it raised $520 million from the business combination.
But then again, it’s important that investors be aware that Hyliion estimates it will burn through $140 million in R&D and general & administrative costs. Taken from that perspective, suddenly that $520 million doesn’t seem like such a long runway.
Investors who read through Hyliion’s earnings presentation from late February will get the feeling that they’re simply looking at the same material from its pre-SPAC period. It’s a lot of hype, and very little substance.
What would go a long way toward convincing potential investors that Hyliion is a great investment right now would be news regarding its fleet installations.
What’s Happening With Fleet Installations?
Hyliion’s big news in Q3 of 2020, back in November, was that it had installed eight of its retrofit hybrid drive trains across 4 fleet operators. It was a clear opportunity for the company to prove that its product offering really served a market need.
However, the Q4 earnings report makes no mention of the results from the fleet retrofits. Rather, the report mentions a vague demo deployment scheduled for late 2021 and initial shipments to fleets in 2022.
Firstly, wasn’t the initial retrofit across those eight trucks a demo deployment? What is this new demo deployment scheduled for late 2021? Something doesn’t add up.
Ostensibly if customers are going to be buying a commercially viable fleet shipment in 2022, then the demos must have gone well. To me, it seems like the company is dancing around some greater truth here. Investors would like to know how that first demo concluded. Otherwise, it’s as if little has changed between then and now.
But according to the company’s most recent financial statements, that’s true, little has changed. That’s why smart money should stay away. Maybe HYLN stock will move upward on some minor news or catalyst. However, there remains no convincing argument for a buy-and-hold investment in Hyliion now.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”