Workhorse Group Inc. (NASDAQ:WKHS), a company specializing in the manufacturing of electric vehicles, has entered into a new financing agreement, securing an additional $3.4 million in funding. This move, announced Tuesday, is part of a larger financing strategy outlined in a Securities Purchase Agreement with an institutional investor that began on March 15, 2024.
Under the terms of the agreement, Workhorse issued a senior secured convertible note with an original principal amount of $3.4 million, alongside a warrant to purchase up to 4,546,024 shares of common stock. This latest transaction, dated September 30, 2024, is the fifth of its kind under the agreement, which could total up to $139 million in convertible notes and accompanying warrants.
The new note bears interest at an annual rate of 9%, with the option for the company to pay interest in cash or add it to the principal. In the event of default, the interest rate could climb to 18%. The note matures one year from the issue date, with the possibility of extension under certain conditions. The note, along with similar previous notes and warrants, is convertible into Workhorse common stock at a price lower than the market rate, subject to a cap on ownership percentage.
The issuance of the note and warrant is part of a broader financing strategy by Workhorse to secure capital for its operations. The funds are being raised through a series of tranches, with the possibility of additional closings to raise further capital as needed. The company has already raised $28,885,714 through prior notes and warrants before this latest transaction.
The financing agreement includes customary covenants and conditions, such as maintaining minimum liquidity levels and restrictions on incurring additional debt and asset sales. Moreover, the agreement stipulates that the investor has the right to participate in future securities offerings by Workhorse, ensuring they can maintain their proportional investment.
The new securities have been registered under the company's existing shelf registration statement, and the proceeds are expected to provide Workhorse with additional working capital to support its ongoing operations and growth initiatives.
This financial update is based on information from a press release statement and the latest Form 8-K filing with the U.S. Securities and Exchange Commission by Workhorse Group Inc.
In other recent news, Workhorse Group has reported the completion and sale of 15 W56 step vans, marking a significant milestone in the company's ongoing operations in the electric vehicle sector. Concurrently, the company has secured an additional $2.6 million in funding through a securities purchase agreement with an institutional investor.
Analyst firm TD (TSX:TD) Cowen has maintained a Hold rating on Workhorse Group, however, it has significantly reduced the stock's price target due to ongoing liquidity concerns and disappointing revenue. The firm cited Q2 sales of $800,000 and a cash balance of $5.3 million as key financials. In a separate development, GreenPower Motor Co Inc. has recently detailed executive compensation for the fiscal year ended March 31, 2024. These are the recent developments for both Workhorse Group Inc. and GreenPower Motor Co Inc.
InvestingPro Insights
Workhorse Group's recent $3.4 million financing agreement comes at a critical time for the company, as revealed by InvestingPro data and tips. With a market capitalization of just $21.18 million, the new funding represents a significant capital injection relative to the company's size.
InvestingPro Tips highlight that Workhorse is "quickly burning through cash" and "may have trouble making interest payments on debt," which underscores the importance of this new financing. The company's financial health appears precarious, with a gross profit margin of -309.08% and an operating income margin of -1035.4% for the last twelve months as of Q2 2024.
Despite these challenges, InvestingPro Tips also note that Workhorse's "liquid assets exceed short term obligations," which could provide some short-term financial stability. The company's stock is currently trading at a low Price / Book multiple of 0.36, potentially indicating undervaluation, though this should be considered alongside the company's financial performance.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Workhorse Group, providing a deeper understanding of the company's financial position and market performance.
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