To Workhorse Investors($WKHS): Lordstown is Never Going To Happen. Take Profits While You Still Can.

-Lordstown Complex, 1435 employees
-WKHS, 74 employees
-Lordstown, 6.2 Million sq. ft
-WKHS, 303 810 sq. ft

Completely disregard this. It is impossible for Workhorse to buy the Lordstown complex, and we will show you why.

WKHS is in the middle of a what they call a death spiral financing agreement with Arosa Capital Management and Marathon Asset Management. There was roughly 20 million warrant shares registered in S-3’s recently acquired pursuant to a loan agreement with Arosa and Marathon last year, and before Trump issued that Royal Pump on twitter, WKHS was trading under $1.00, and risked being delisted by the Nasdaq, with under 1 million in annual revenue.

Marathon owns about 10 million warrants, and Arosa 8 million.

Recently, Arosa’s share of warrants increased, so as of now, they currently own about
10 000 000 exercisible at $1.25, and $1.62, representing more than a 100% premium to the current share price.

For anybody having trouble understanding what this means, we will try our best to break it down for you.

The Stated Value of the Preferred Shares is $20.00 per unit, and the annual interest payment, which is to be paid out in quarterly installments, is 8%. That translates into $2,000,000 worth of shares per year. In regards to the warrants, if we multiply 7.41 by
1 250 000, we get 9,262,500 common shares, and it says that the warrants are exercisible ***immediately @ $1.62 per share*** 

What is very telling is the fact that Arosa sold shares immediately prior to this Trump and Dump. As a shareholder, if you haven’t read this yet, you will probably be shocked at what Arosa thought the company was worth at the time. This wasn’t reported until June.14th, 2019

What?…. Arosa loans the company money, then 5 months later they get paid back with a new loan from a completely different lender, but they get to keep the 5 million warrants? That’s one hell of a deal.

Workhorse also recently sold a large asset to Duke Energy, which at the time was being used as collateral in the Arosa loan agreement. Personally, and this is completely our opinion, this transaction is reminiscent of what they refer to as a “bust out” . Many of you remember how Mitt Romney affiliated Bain Capital would lend to struggling companies under aggressive terms, loot the company of the their assets, then fire everybody. Activity like this is not uncommon in death spiral financing arrangements. Under normal circumstances, it would be impossible for the borrower to secure financing, but due to desperation, they will agree to whatever terms are available with the hope that things might turn around. This isn’t the kind of behavior you’d expect from a company in legitimate talks with General Motors to buy the Lordstown Complex, a 6.2 million square foot facility (getting to that soon).

source image: http://lemerg.com/981733.html

One of the covenants of the Arosa loan is that Workhorse is to sell Surefly, one of their most important assets. They manufacturer an interesting Multicopter prototype, something that with the right leadership has true potential.

They also accrued a warranty liability of 6.9 million in 2018 for batteries that are “defective”. That’s a lot of money to put aside, and a colossal screw up considering the timing. They are barely scraping by.

Just one look at their operations makes it pretty clear that the dilution is not even close to being over. Yes, that’s a quarterly..

They even tell you they don’t have enough money to make it through to the second half of this year, not next year…this year! Seriously, and Trump pumped this thing? This is insanity!

Also, they admit that the financing from Arosa and Marathon is for further inventory purchases. No mention of capital expenditure.

Net sales went down 93%?…..Okay, lets take a step back here. 2017 sales were 10 million, but 2018 sales were only $700k? Since the expenses are almost the same for both years, if you do the math, this means 2018 expenses are 3000% of net sales!

Considering all this, does it seem logical that Workhorse is even capable of buying the Lordstown complex, a 6.2 million square foot, 905 acre manufacturing facility? It’s a monstrosity, equal in size to 685 football fields.

`

Versus Workhorse’s 300 000 sq.ft. in production space

That is only 5% the size of Lordstown, and remember, WKHS is barely getting by…

Just a quick browse through LoopNet.com’s advertised industrial properties in Cincinnati and Cleveland should give you an idea of the price tag they are looking at if they did decide to, somehow, buy this gigantic manufacturing plant

This alone should be the only figure you should need. Let us reiterate: it is the size of 685 football fields. We will show you more though just for affect

According to Workhorse’s most recent annual report, they only had 74 employees. If this was a football stadium, 74 players would need about 4 stadiums, so what is Workhorse going to do with the other 681 football fields of production space they supposedly intend to buy? For those that still have doubts, we will cite one more figure just so it hits home.

source image: http://gmauthority.com/blog/gm/gm-facilities/gm-usa-facilities/gm-lordstown-plant/

Economic impact of almost 1/2 billion dollars, and Workhorse isn’t even producing 1 million in revenue…..They must really think we are stupid!

Last, but not least, their competitors are massive corporations with 100’s of years of combined experience. We could keep going on, but you probably get the point by now. The company is facing bankruptcy, had virtually no sales last year, and the covenants in the loan agreement require them to sell one of their most important assets. They put aside 7 million for a warranty liability for batteries that are “defective”, while selling another few million in batteries to Duke Energy. Also, the founder recently stepped down as CEO, someone who had been with the company for almost a decade!

This also happened when we tried visiting their website…

How often does that happen to you when you are browsing the internet? Not usually right? As of now, WKHS is $3.50 per share, which gives it a valuation of around $200 000 000. This is more than 250 times current sales….

For that?……………………It’s so outrageous that your mind naturally dismisses this as some kind of misunderstood anomaly, a psychological phenomenon known as cognitive dissonance. Magicians are famous for this. They pull the trick right in front of your face, but because you are focused on their distraction, you miss what is staring you dead in the eye

****DISCLAIMER****This is all our opinion, and we are not financial advisers. You should consult a financial adviser before making any financial decision with regard to publicly traded securities, or any security for that matter. You should not use this information as the basis for an investment decision. This company carries an extremely high degree of risk. You should consider this information as similar to personal insight from a peer/friend/acquaintance, and thus it should, obviously, not be the primary source material for basing an investment decision, because, similar to any opinion from a peer/friend/acquaintance, it could be completely and utterly incorrect! Good luck and happy trading everyone****

18 thoughts on “To Workhorse Investors($WKHS): Lordstown is Never Going To Happen. Take Profits While You Still Can.

  • September 9, 2019 at 1:31 pm
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    So someone actually posts a bunch of valid information and you have no response? C’mon, I thought this was a well thought out written article. Lol.

    Reply
    • September 9, 2019 at 1:45 pm
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      No, I don’t time to answer that. I’ve already answered so many questions now, and the facts are clear in the article anyways. Sorry I have better things to do. Do they have good product? Yeah. Are they worth 300 million dollar. No. Argument ends there

      Reply
  • Pingback:State Rep Says Worsehorse Probably Has The Money To Buy Lordstown. No, They Don’t

  • August 3, 2019 at 4:19 pm
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    Thank you for sharing this solid research. Question: why share it? As you know, the more people that short it, the more chance for a secondary squeeze. Either way, I learned a lot by comparing your notes with mine and really appreciate it.

    Reply
  • July 14, 2019 at 3:20 pm
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    I seem to remember a very large company that started out this way…TESLA. And they were in way worse shape than Work Horse at one point.

    Reply
    • July 14, 2019 at 3:28 pm
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      TSLA also had no competitors at the time, and they revolutionized the auto industry. All you have to do is look at their balance sheet to know that this stock is a complete scam at these levels. If this company was so great, why did Arosa, one of their largest shareholders, sell for under $1.00 only two months ago? Nobody cared about this company until that Trump tweet. Lordstown is not going to happen, and it never was.

      Reply
      • July 16, 2019 at 8:45 am
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        I agree, TSLA was on the fore front of the auto industry. They were a game change. Work Horse will be a game changer as well, but not for the auto industry. They are simply trying to grab a piece of electric auto market. The big USPS contract that they will land in a few months will ensure their progress in getting to the market first with the Sure Fly drone. Another game changer. They’re one of three companies that going through the FAA certification process. Once certification is complete, look out! Arosa is old news and was probably clearing money to be able to buy in on the new company being formed. The current COO recently filed for a purchase of 400,000 shares. Why would he do that if it wasn’t going anywhere? You don’t put on a condom unless you plan using it. All this pretty much falls on Trumps shoulders. Of the 5 companies remaining for the USPS contract. WKHS is the only one based in Ohio. Why is this big? Because no president has gone on to win the WH without winning Ohio. It’s all about votes and being able to stand in front of the people of Ohio and say he brought jobs back? That is why he will make good on at least this promise and Work Horse/new company will prevail.

        Reply
        • July 16, 2019 at 8:58 am
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          Nobody cared about this stock until it was pumped by Trump, and there is a reason for this. Also, those shares are options, part of a stock based compensation plan, and they are exercisible at 94 cents. The current valuation is 400x 2018 sales. This is an outrage and an insult to our intelligence. How can you read this report and not think this is a pump and dump.

          Reply
          • July 16, 2019 at 9:22 am
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            Everybody thought the same about TSLA and dam thing almost went bankrupt in 07. And if it wasn’t for the huge government loan that was given to them back in 09, who knows where TSLA would be today. Instead of WKHS getting a loan, their getting a fat contract that will cover all their financial problems to date and have room to expand. If you can’t see past these small financial shortcomings, that is your problem. I bought in at .87. So either way I’m coming out way ahead. Good Luck,

            Reply
            • July 16, 2019 at 9:37 am
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              That was 10 years ago and they revolutionized the auto industry. No car maker was even considering EV at the time. Tesla will go down in history as one of the worlds greatest innovators….You are being duped sir. Please play it safe with this stock. Don’t hold a loss. You will not be missing anything

              Reply
  • July 13, 2019 at 6:38 pm
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    wow you guys are pretty dumb. a separate entity is in the works to purchase lordstown and license from workhorse while workhorse will also own a minority stake in the new entity. also, you are missing the filing from June 30th which caused arosa to sell a very small portion of their shares on may 2nd and still remain owning the 9.99% cap : whoever did the dd here struck out. not to mention the news and meeting next week; you’re setting up for failure.

    Reply
    • July 13, 2019 at 7:03 pm
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      Before Trump pumped this POS on twitter, it was facing bankruptcy and delisting. They are so far in debt with barely any earnings, so even if they did “acquire a minority interest”, it would be meaningless. It wouldn’t change anything, but in fact, make things worse. They already have a production facility, and also, they say explicit that the loans are for inventory purposes.

      Also, there is no attestation in the filings specifying that those sales were due to the blocker provision. They should have told us. Until they do, we have no other choice but to believe that this was the price they believed it was worth at the time. In regards to the filings that you mentioned (which were not filed on June.30th by the way), they state that Arosa only owned “1,850,000 shares of Common Stock”, so where is this blocker provision coming from? If it was them that purchased the shares on April. 30th (priced at 74 cents might I add), then why does it say Arosa only owns 1,850,000 shares? What is even more unusual is the fact that on April. 03, 2019, it is reported in their proxy statement that Arosa held 2,350,000 shares of common stock. Has he sold stock? This is a joke. It’s a disgrace

      Reply
    • July 13, 2019 at 7:22 pm
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      This argument ends very easily by looking at their balance sheet and 2018 revenue. This is an outrage. 5 million free warrants? They get paid back by “Wilmington Trust” and Marathon, but get to keep the warrants? What? Common people…And you’re talking about blocker provisions? Nobody wanted this POS before Trump spread that unfounded rumor, and it should be quite obvious why.

      Reply
  • July 13, 2019 at 12:33 pm
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    Thanks

    Reply
      • August 2, 2019 at 3:05 pm
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        You guys keep rambling on about what happened back when ‘this’ and what happened way back when ‘that’ was going on…. But if you’re going to pick through all the details, and use every one thats gives you an advantage you can make this rhetoric fit whatever it is you want. Some of the key details that you’ve overlooked….
        *Workhorse has an agreement with Duke energy to effectively ensure that the proper infrastructure is in place for charging fleet electric vehicles, or in a more specific case mail trucks
        *Workhorse has been working with the defense department and has been working on a loan for r&d through the defense department. This is in regards to the surefly
        *Workhorse already has a signed arrangement with Ryder trucks in order to ensure their customer base that purchasing one of their electric vehicles will not result in a lack of after purchase service which is a huge issue Tesla’s dealing with. Ryder has around 500 service locations nationwide all of which would be accessible to a Workhorse truck owner
        *Workhorse has a history building vehicles that were government issue when they were owned by Navistar AKA International, as well as a history with GM when they took over an RV platform that GM was no longer going to produce as well as an electric vehicle that work horse, then it was amp holdings, built as a prototype and entered in an international multi company competition with coordination from GM in which they won first place
        *Workhorse has orders for electric delivery trucks from several large companies, including 50 delivered to UPS with 950 to go because of their satisfaction with the first 50
        *Workhorse has developed in-house software for real-time tracking and route efficiency mapping for deliveries. This is something that they used as incentive with their electric delivery trucks
        *Workhorse has also developed a autonomous delivery drone that can pair with their electric delivery truck in order to facilitate more efficient last mile delivery. UPS is already currently testing them and they’ve been tested in Chicago as well
        I’m not sure if it’s current but they were the only other American manufacturer who was officially authorized buy Panasonic to use their battery cells in automotive or aeronautical vehicles, only other referring to Tesla of course. The Panasonic cells have proven more than capable through Tesla’s design and implementations.
        So you add all that up, then there’s the fact that there’s a new entity forming around the purchase of lordstown, the fact that GM has announced not only several EV models to be produced soon but touting Cadillac as the next ev goto brand, and the stalks of bring the Hummer name back my guess would be as electric, GM offered to buy into rivian but rivian declined reason being as we found out a couple weeks later Ford is investing in them, seems to me that GM will be involved with Workhorse More than they are leading on. And if you’re a big company with a broad reach many resources in supply chains as well as the top notch advertising team, what company better to invest in then one that has experience and know how in a very delicate and specific market of EVs, as well as a company that who wasn’t shy or afraid about spending a whole lot of cash on r & d. I understand the other side of it I get it. I see how this is unconventional and how it doesn’t follow what everyone’s used to, doesn’t make perfect sense, but for the same reason Tesla stock is always all over the place, this company falls in the category of disruptive tech. And your gonna know when the disruption begins.
        BTW, Berra (GM CEO) Has spoken twice about the lordstown sale to Workhorse in the media expressing optimism, one tweet from Donald Trump, and Mike pence bringing it up this week… Why in the world would all of the top players that needed to be involved in order to make it happen becoming on a situation that will never come to fruition?

        Reply

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