Predictions put Workhorse as favorite to win USPS contract

Award could bring $800M to Lordstown Motors Corp. plant

A West Coast-based investment banking firm predicts Workhorse Group Inc. will win the $8.1 billion U.S. Postal Service contract to manufacture its next generation of delivery trucks, an award that has the potential to pump about $800 million in revenue into Lordstown Motors Corp.

Roth Capital Partners in Newport Beach, Calif., believes Workhorse is the “best fit” for the contract of the three remaining competitors, which also include Oshkosh Corporation, a Wisconsin-based company that builds specialty trucks and commercial vehicle maker Karsan Automotive in Turkey.

A decision from USPS could be announced as soon as today, but the USPS was noncommittal Monday whether it would happen.

An email from a spokeswoman states because of the viral pandemic and its impact on the postal service and supplier operations, “an award(s) is currently planned for the production phase by the end of the calendar year.”

Today is the 90-day limit that USPS stated a decision would be made in from the July 14 date when companies were required to submit request for proposal responses, according to a company update from Roth.

“While it’s entirely possible the award is delayed, we expect a positive outcome for Workhorse,” the company note states. Roth also predicts a “winner-takes-all scenario” because of costs surrounding two parts, maintenance and training organizations.

Lordstown Motors’ plant, the former General Motors assembly plant, is the likely manufacturing site for the Workhorse mail truck should the Cincinnati-area company prove successful. Workhorse has a minority 10 percent stake in Lordstown Motors, which will use Workhorse technology to produce the Endurance.

Steve Burns, founder and CEO of Lordstown Motors, also founded Workhorse.

Roth notes despite uncertainty surrounding any sort of outsource manufacturing agreement, a contract award for Workhorse “could reasonably be expected” to mean roughly $800 million in potential revenue for Lordstown Motors.

Burns has said Lordstown Motors’ success doesn’t hinge on the USPS contract, but that its business model was built on sales of the Endurance, which, according to the company has 40,000 preorders for the truck that represent, barring delay or cancellations, about $2 billion in revenue.

Workhorse faced some criticism last week in a report by Fuzzy Panda Research, which according to Bloomberg, is a firm that owns a short position in Workhorse’s stock. The report alleges, according to Bloomberg, the USPS truck prototypes were problematic and were greater than cost guidelines.

Fuzzy Panda also claims a postal driver was hurt when a parking brake in one of the prototypes failed, according to Bloomberg.

An email seeking comment was sent to Gateway Investor Relations, the firm that handles Workhorse investor relations.

On Monday, Workhorse announced it secured $200 million in financing from two institutional lenders through a note purchase agreement. The proceeds before expenses are expected to be about $194.5 million the company intends to use to, in part, accelerate production, bring new products to market and replace previous higher cost financings.

The company also announced it has an agreement with the holder of its existing note to exchange the full $70 million on the notes for shares of the company’s common stock.

After closing and when the proceeds are released, Workhorse will have more than $270 million in cash on hand, according to the company.

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.

The companies announced the proposed business combination in October. It’s a move that is expected to infuse $675 million into Lordstown Motors.

The new company will remain named Lordstown Motors Corp. and be traded on the Nasdaq exchange under the ticker “RIDE.”


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