Description
DESCRIPTION: Workhorse is an electronic vehicle company that manufactures delivery trucks and drones. It focuses on “last-mile” delivery. It competed for a lucrative U.S. Postal Service contract, which gave credibility to the company, but it recently lost the bid for reasons that make its future prospects questionable. It only delivered 7 vehicles in the third quarter of 2020 and has a negative gross profit
POTENTIAL RED FLAGS
● Failed USPS Bid: The hype behind WKHS was due to its consideration for U.S. Postal Service’s Next Generation Development Vehicle (“NGDV”) worth $6.3bn. On Feb. 23, the USPS announced that it awarded the NGDV contract to Oshkosh Defense
● Broken Relationships: UPS was previously engaged (pg. 30) with WKHS to develop a fleet of fully electric EVs. When it released the next edition of the report a year later, there was no mention of WKHS. WKHS mentions an agreement with UPS on its latest annual report but no deliveries seem to have taken place. Additionally, WKHS’s main partner in the USPS bid sold its rights for only $7.6mm
● Heavy Insider Selling: Since the start of the year, the following members of WKHS have sold stock: CEO, COO, CFO, Controller, General Counsel, and 2 directors. All these sales came before the announcement that they were not getting the USPS contract, suggesting that they were never confident that WKHS would win it
● EV Craze, Retail Darling: Everything remotely related to EVs has been hot (until lately). WKHS has been a favorite of retail investors. Fuzzy Panda Research (see notes below) believes that WKHS is involved in a stock promotion scheme
KEY PEOPLE
● Steve Burns (Founder & Former CEO): Currently the CEO of Lordstown Motors Corp, another EV play that recently when public via SPAC and has its own issues. He still has close ties to the company and its CEO
o Ties to Stock Promoters: While at WKHS, he hired CISR for investor relations work. The SEC later charged CISR for illegal stock promotion. During his tenure, SeeThruEquity Research initiated coverage on WKHS (AMP Holdings at the time) and was also later charged by the SEC for its purpotedely unbiased reports
o Dubious History: Burns has been involved with many micro-cap companies whose registration was later revoked (Askmenow) or which shuttered (ITookThisOnMyPhone.Com). A WKHS 10-K (pg. 12) claims Askmenow was acquired by Ocean West Holdings but SEC filings say they were the same company (pg. 3) and only a name change occurred
OTHER
● Fuzzy Panda Research: Announced a short position in October spelling out the reasons why WKHS would not win the USPS contract. They were correct and the stock is still up nearly 400% in the past year
o Safety Concerns: The short seller claims that after the brakes failed on a WKHS vehicle, that the driver had to bail and ending up being hospitalized. A source also said that motors and suspensions ceased to work properly while in use. Although it doesn’t name the bidder specifically, a USPS report on the project stated that it did encounter the above issues while testing vehicles
o Generic Parts: After visiting a WKHS production facility and reviewing its patent portfolio, the short seller found that it uses many generic parts and does not appear to have any significant IP
o Stock Promotion: See above notes above on Steve Burns. Sharing a long list of YouTube videos and online articles, the short seller believes similar deceptive practices may be occurring
o Shady Financial Partners: WKHS has a history of working with problematic financial firms. One was charged by the SEC for being an unregistered penny stock dealer, another was expelled by FINRA, a third paid a $1.6mm fine for fraud. Even more questionable ties exist
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.
Catalyst
Reality