Workhorse Group (NASDAQ: WKHS) expects a “prolonged process” to alter the U.S. Postal Service’s decision to award next-generation mail truck business to defense contractor Oshkosh Truck Corp. (NYSE: OSK).
The Loveland, Ohio-based Workhorse was stunned last week when the Postal Service awarded a 10-year contract initially worth $482 million to the Wisconsin company. Oshkosh makes military vehicles, fire trucks and ambulances.
The Next Generation Delivery Vehicle (NGDV) business came down to three finalists. Workhorse offered the only battery-electric powered vehicle (EV). That was consistent with President Joe Biden’s executive order to make all 645,000 federal fleet vehicles zero-emissions EVs.
Investors had bid up Workhorse shares to record levels. They expected it would get at least a piece of the multibillion-dollar contract. When that didn’t happen, Workhorse shares lost 50% of their value in two days. Analysts, in turn, cut their target prices.
“While we were not modeling success in the USPS [competition], we had anticipated Workhorse would play a role in the contract, especially given the administration’s stance around government fleets being zero emission,” Cowen analyst Jeffrey Osborne wrote on Monday after Workhorse’s Q4 earnings call.
Hiring lawyers and consultants
After a meeting with the Postal Service on Wednesday, Workhorse said it will “follow the proper due course procedures as defined by the USPS and will also look to other options available to us,” Workhorse CEO Duane Hughes said in a press release Thursday.
“In the interim, we have retained the services of leading legal and corporate advisory firms, including Akin Gump Straus Hauer & Feld LLP and Mound Cotton Wollan & Greengrass LLP, to identify our options and pursue them effectively,” he said.
Workhorse shares traded at $13.76, down 7.77% at 10:28 a.m. Thursday. The meme stock frenzy briefly pushed Workhorse shares above $42 a few weeks ago.
“With the loss of the extremely lucrative USPS NGDV contract, Workhorse lost its single-biggest chance to gain scale in the EV market,” short seller Phillip Martinelli wrote Monday on the investor site Seeking Alpha.