Shares of Workhorse Group (NASDAQ:WKHS) are under pressure, again. Here is what is going on and why you should pay attention on your portfolio.
Entire EV sector was on the run for the past 10 days. NIO shares almost doubled in value, XPEV more than doubled but WKHS is hovering between $15 and $20. It is a waiting game for WKHS, and the only real catalyst, USPS deal, is not in sight.
Shareholders feel like they are missing out on other opportunities while their money is trapped in Workhorse stock.
No one really believes anymore that Workhorse will get the long awaited USPS deal. Except for the people that are in love with WKHS stock. And we all know that you shouldn’t fall in love with stocks.
This may cause a significant move in WKHS stock price
While getting USPS deal would be a great thing for both company and stockholders, in my eyes it is not such a big thing if WKHS ends up without this contract. Here is why. If USPS decides to go with WKHS you need to have in mind that Workhorse would be obliged to give a guarantee for the fulfillment and actually be able to deliver 180,000 NGDVs over five to seven years.
If we divide 180,000 by 7 that would be around 25,000 vehicles per year. It is not doable. This is basically a science fiction.
Previously Workhorse said how they got a 500 vehicles order from Pritchard Auto Company, but failed to acknowledge how they delivered only 5 vehicles in Q2. Five vehicles for the entire quarter?
Workhorse claimed that, prior to an outbreak of the novel coronavirus among its employees and other unexpected hurdles, it anticipated delivering 300 to 400 vehicles last quarter. Still, the bottom line is that the company only delivered seven vehicles in Q3 and said that it will be able to deliver the other 293 to 393 trucks previously targeted only in 2021.source
So, instead going for the jugular, they are still wasting their time and money on God knows what. But here is the thing, I am also wasting my time talking about deliveries when there might be another, bigger, problem for Workhorse going forward.
According to The Business Journal, Lordstown Motors (LMC), is accused of deploying a “Trojan horse” scheme in order to steal intellectual property from Karma Automotive. Workhorse previously granted LMC a three-year exclusive license of certain intellectual property for an initial equity stake of 10% in LMC. This means that WKHS owns 10% in LMC.
But there is more to this. Workhorse’s founder and former CEO, Steve Burns, actually formed a new private company called Lordstown Motors Corp. So, these are all pretty much the same people.
And now that Lordstown Motors is taken to court by Karma Automotive that USPS deal looks even more like a sci-fi. Do you really believe that USPS would sign an agreement with such a troubled company?
And who is Karma Automotive? Karma Automotive is an American company producing luxury EVs. Karma is created from the assets of Fisker Automotive after its failure. Yes, that Fisker, previously owned by Henrik Fisker, the same guy that now runs Fisker Inc.(NYSE:FSR).
After troubling Q3 results WKHS stock already started losing steam, losing 6.34% on Friday. Monday morning could be another selloff for WKHS because there is really no big catalyst in the near future. It’s a recalibration of expectations — not a recalibration of fundamentals, but of expectations — and that will pull some serious wind out of Workhorse’s valuation.