Workhorse Downgraded on Concerns Over Postal Service Contract Timing

Roth Capital downgrades Workhorse Group to neutral from buy.
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Roth Capital analyst Craig Irwin downgraded electric truck maker Workhorse Group  (WKHS) - Get Report to neutral from buy after a U.S. Postal Service spokesperson told Roth the USPS won’t decide who wins the competition for its next generation of delivery trucks until year-end, he said.

Irwin cut his share-price target to $27 from $33. The stock recently traded at $24.38, down 8.28%. It has skyrocketed 701% so far this year amid the mania for electric vehicle stocks. Analysts’ average price target is $23, according to Bloomberg.

As for the USPS, last week Irwin forecast it would make its selection for the $8 billion contract Tuesday (today), Bloomberg reported.

But now that USPS is “punting” on the contract, that “materially” increases uncertainty for Workhorse, he wrote in a report.

Workhorse announced Monday that it was selling $200 million of four-year, 4% senior secured convertible notes to two unnamed institutional lenders.

The proceeds will be used to increase and accelerate production volume, advance new products to market, replace previous higher cost financings, and support current working capital and other general corporate purposes, the company said in a statement.

Workhorse also has forged an agreement with the unnamed holder of its existing 4.5% convertible notes to exchange the $70 million outstanding principal for shares of the company's common stock. After this transaction, Workhorse will have more than $270 million in cash available.

As for the notes being purchased, they will initially be convertible into common stock by the holders at $36.14 a share, a 35% premium over Friday’s closing price.