Venture capitalists have a rule. If you buy 10 ideas, 5 will fail, 4 may break even, and 1 will justify the rest. If you got into the Special Purpose Acquisition Company (SPAC) craze last year, you think you’ve become a venture capitalist. You must expect failures. At present, Hyliiion Holdings (NASDAQ:HYLN) stock looks like one of those failures.
Hyliion stock opens on May 12 at around $ 8.50 per share. This is below the price of $ 10 set by its sponsor SPAC, Tortoise Acquisition, in 2019. When the merger became final last September, Thomas Healy, 28, founder of Hyliion, reportedly âwon the lotteryâ. His stake in the company was worth over $ 1 billion.
It’s no more.
HYLN action: what didn’t work
Hyliion wants to give big trucks, the 18WD monsters that roam America’s highways, electric trains while letting them run on conventional fuels. The idea is that it’s too expensive for fleet owners to go all-electric, but if Hyliion can get them halfway there, they can cut costs and help the environment.
Hyliion powertrains are available for diesel or compressed natural gas. The exclusive battery management system supports all types of fuel, including pure electricity.
In September, Hyliion was trading up to $ 50 / share. It has now lost over 80%, as its first quarter report showed it was only installing 10 powertrains. These are demonstration vehicles.
Instead, the statement focused on a âHydrogen Innovation Councilâ of fleet owners who âwill work closelyâ with it. Together, the board members have more than 100,000 trucks in their fleets. But there is no financial commitment from any of them.
Hyliion got around $ 560 million from Tortoise and started the year with $ 592 million in cash and cash equivalents. Its 2020 10-K, and 10-Q for its first quarter, showing how much money was left in March, are due on May 24.
Can they do it?
There are currently two questions for Hyliion. Does it have enough cash to go into production? Can he get orders on time to bring money to customers?
Our Alex Sirois recently estimated that Hyliion will spend $ 140 million this year on research and commercial costs. Recent statements from the company speak of shipments in 2022.
It cuts things off close, which is why our Josh Enomoto says there are now viability issues about the business. Some fleet owners, like Walmart (NYSE:WMT), want to switch to fully electric fleets. Others are unwilling to ditch diesel and fear they will be stuck with “bridging” technology if Hyliion fails. The perception can come true when you talk about an investment that can exceed $ 200,000 per truck.
For his part, Healy says he is not concerned. He uses Peterbilt for the test frame, and runs a modest Twitter account dedicated to company news. He says the company has redeemed its warrants and has 120 employees. He advises patience, saying the daily share price “is not the right goal.”
HYLN action: the bottom line
If you bought Tortoise when it launched, you were speculating. If you buy Hyliion today you are still speculating. If you bought HYLN stock at its peak, you’re out of luck.
This is the problem of public investors trying to get into venture capital investments. You are at the end of the line. You get a small share of equity for your money. SPAC sponsors like Vince Cubbage from Tortoise are grabbing large amounts of equity on a minimum cash investment. This is real venture capital financing.
If you bought Hyliion for $ 50, you played the biggest fool. You can still lose $ 8.50, but at least here you have a chance and know what you’re getting into.
At the time of publication, Dana Blankenhorn does not directly own any shares, directly or indirectly, in any of the companies mentioned in this article.
Dana blankenhorn has been a financial and technology journalist since 1978. He is the author of Big Bang of Technology: Yesterday, Today and Tomorrow with Moore’s Law, available from the Amazon Kindle Store. Write to him at [email protected], tweet it to @danablankenhorn, or subscribe to its sub-stack https://danafblankenhorn.substack.com/.