Workhorse Group Inc. (NASDAQ:WKHS), a company specializing in the production of electric vehicles and utility vehicles, has entered into a securities purchase agreement that secured an additional $3.5 million in financing. The company, which currently trades near its 52-week low of $0.56 and has seen its stock decline by nearly 90% over the past year, continues to face significant financial challenges.
According to InvestingPro analysis, the company operates with a significant debt burden and is quickly burning through cash. This agreement, disclosed in a recent 8-K filing with the SEC, was finalized today and involves the issuance of a senior secured convertible note to an institutional investor.
The note, which carries a 9% annual interest rate, can be converted into Workhorse Group's common stock at the discretion of the holder. The conversion price is set at the lower of two benchmarks: either a predefined reference price or a price tied to the stock's recent trading performance, with a floor price established to prevent conversion below a certain level. The note is also backed by a guarantee from Workhorse Group's subsidiaries and is secured by a lien on the company's assets.
The agreement follows a series of similar transactions that Workhorse Group has engaged in since March 15, 2024, which cumulatively have raised substantial capital through both convertible notes and warrants. To date, the company has issued notes totaling over $38 million and warrants to purchase millions of shares of common stock.
This latest financial maneuver is part of Workhorse Group's ongoing strategy to strengthen its balance sheet and fund its operations. The company has also disclosed that it is currently evaluating the need for an additional reserve against its prepaid purchases asset, particularly those related to its W4 CC trucks. With a concerning current ratio of 1.16 and an Altman Z-Score indicating financial distress, InvestingPro data reveals the company's overall financial health score is rated as WEAK.
For deeper insights into Workhorse's financial position and future prospects, investors can access the comprehensive Pro Research Report, which provides detailed analysis of key metrics and growth potential. 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.
Investors should note that the issuance of the convertible note and the potential conversion into common stock could lead to dilution of existing shares. However, the note includes a beneficial ownership cap to prevent the holder from acquiring more than 9.99% of the outstanding common stock through conversion.
The transaction is part of Workhorse Group's broader efforts to manage its financial position as it continues to navigate the competitive electric vehicle market. With revenue of just $9.1 million in the last twelve months and a negative EBITDA of $85.13 million, the company faces significant challenges ahead. InvestingPro subscribers have access to over 20 additional key insights and metrics about Workhorse Group, including detailed analysis of its market position, growth prospects, and financial health indicators. This news is based on information from a press release statement.
In other recent news, Workhorse Group Inc. has announced several significant developments.
The company recently appointed Berkowitz Pollack Brant Advisors + CPAs, LLP as its new auditor for the fiscal year ending December 31, 2024, replacing Grant Thornton LLP which declined to stand for reappointment. TD Cowen, in its latest analysis, maintained a Hold rating on Workhorse's stock while raising the price target to $1.25 from $0.25.
Workhorse Group has also been active in securing additional financing. The company issued $3.5 million in senior secured convertible notes to an institutional investor, part of a series of financings under a previously disclosed securities purchase agreement. In another transaction, Workhorse Group issued a $2 million senior secured convertible note to an institutional investor.
Despite these developments, Workhorse Group faces significant financial challenges. The company reported sales of $2.5 million and a cash reserve of $3.2 million. It has also been warned by the Nasdaq Stock Market about potential delisting due to its stock trading below the $1.00 threshold for 30 consecutive days.
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