Workhorse Group secures $35 million in financing

Workhorse Group Inc. (NASDAQ:WKHS), a company specializing in electric vehicles, announced today that it has entered into a securities purchase agreement with an institutional investor, securing $35 million in financing through the issuance of a senior secured convertible note and a warrant to purchase common stock.

According to InvestingPro data, this financing comes at a crucial time for the company, which has been operating with significant debt and rapidly burning through cash. The company’s market capitalization currently stands at just $20.49 million, with its stock down 28.38% year-to-date.

This transaction is part of a series of financings agreed upon on March 15, 2024, which could total up to $139 million. With a concerning gross profit margin of -333.34% and revenues of just $9.1 million in the last twelve months, the company’s financial health score ranks as WEAK according to InvestingPro analysis, which offers 20 additional key insights about the company’s financial situation.

The latest funding, closed on Wednesday, involves the sale of a note with a principal amount of $35 million, which is convertible into Workhorse common stock, and a warrant enabling the purchase of up to 55,045,655 shares of common stock. This is the tenth additional note issued under the agreement, and it was sold with an original issue discount of 12.5%, netting the company $30,625,000 before fees and expenses.

Proceeds from this financing have been placed in a lockbox account, with conditional releases to Workhorse. The company may access the funds as the investor converts portions of the note, or monthly in the amount of $2,625,000 if certain market conditions are met, or with the investor’s consent.

The note is secured and ranks senior to unsecured debt, backed by guarantees from Workhorse’s subsidiaries. With an interest rate of 9.0% per annum, it will mature one year from the issue date, subject to extension under certain conditions. The note can be converted into common stock at a price lower than the market, subject to a 9.99% cap on ownership by the note holder.

The warrant has a 10-year term and an exercise price of $0.6999 per share. It grants the investor rights to participate in future securities offerings on par with common stockholders.

The issuance of the note, the warrant, and the common stock upon conversion have been registered with the SEC. This financial maneuver is intended to provide Workhorse with the capital necessary for its operations and strategic initiatives.

This report is based on a press release statement and reflects the latest financing developments for Workhorse Group Inc. as per the SEC filing. For investors seeking deeper insights into Workhorse’s financial situation and future prospects, InvestingPro offers a comprehensive Pro Research Report, part of its coverage of over 1,400 US equities, providing detailed analysis of the company’s financial health, valuation metrics, and growth prospects.

In other recent news, Workhorse Group Inc. has secured an additional $5.5 million in financing through the issuance of senior secured convertible notes to institutional investors. This includes a $3.5 million note, which carries a 9% annual interest rate and can be converted into common stock at the discretion of the holder, and a $2 million note with a 12.5% original issue discount. These transactions are part of a series of similar financings that have raised substantial capital for the company.

Workhorse Group has also made changes to its financial oversight, appointing Berkowitz Pollack Brant Advisors + CPAs, LLP as its new auditor for the fiscal year ending December 31, 2024. This change comes after the company’s previous auditor, Grant Thornton LLP, declined to stand for reappointment amid financial concerns.

In addition to these developments, Workhorse Group is evaluating the need for an additional reserve against its prepaid purchases asset, particularly those related to its W4 CC trucks. This evaluation may result in an additional reserve of between $1.5 million and $1.8 million being recorded for the year ended December 31, 2024.

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