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Workhorse stock lowered

Investment firm makes move after USPS doesn’t award truck contract

The investment banking firm that predicted a Cincinnati area-based affiliate of Lordstown Motors Corp. would win the multibillion U.S. Postal Service contract to make its next-gen delivery trucks has downgraded the company’s stock.

Roth Capital Partners moved Workhorse Group Inc. from buy to neutral with a price target of $27 after the postal service failed earlier this week to announce the recipient of the contract.

The Newport Beach, Calif., firm had targeted Workhorse stock at $33 heading into Tuesday, when the company anticipated a decision from the postal service on the $8.1 billion contract to manufacture 165,000 new vehicles.

Tuesday marked the end of the 90-day period in which the postal service previously had stated a decision would be made, according to Roth.

When it came and went without an announcement, Roth downgraded the Workhorse stock position and increased the risk for an award after the postal service stated it expects to make a decision by the end of the year.

Roth was contacted by the postal service “after heavy press coverage” of the company report indicating confidence that Workhorse would be the postal service’s pick, according to a published report.

“We always viewed political optics of an award before the election as essential, and now see increased risk for an award,” the published report states of Roth analyst Craig Irwin’s comment.

Roth’s initial report last week stated a Workhorse win had the potential to pump about $800 million in revenue to electric truck startup Lordstown Motors, in which Workhorse has a 10 percent stake. The Lordstown Motors plant, the former General Motors assembly plant, is likely the manufacturing site for the Workhorse mail truck should the company prove successful.

Roth called Workhorse the “best fit” for the contract and predicted a “positive outcome” for the company. It also predicted a “winner-takes-all scenario” rather than splitting the contract among companies because of costs surrounding two parts, maintenance and training organizations.

In addition to Workhorse, left in the mix for the postal contract are Oshkosh Corporation, a Wisconsin-based company that builds specialty trucks, and commercial vehicle maker Karsan Automotive in Turkey.

Steve Burns, founder and CEO of Lordstown Motors, also founded Workhorse. He has said Lordstown Motors’ success doesn’t hinge on the postal service contract but that its business model was built on sales of the Endurance truck, which, according to the company, has 40,000 preorders that represent, barring delay or cancellations, about $2 billion in revenue.

Production is expected to begin early next year.

On Oct. 22, DiamondPeak Holdings Corp. stockholders are to meet to approve the proposed merger with Lordstown Motors. Closing the merger is the final step toward Lordstown Motors being a publicly traded company. It’s a move that is expected to infuse $675 million into Lordstown Motors.

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