425: Workhorse Group Explores Merger with Private EV Manufacturer, Plans Significant Debt Refinancing

Workhorse Group Inc. is in discussions to merge with a privately held U.S.-based electric commercial vehicle manufacturer, a deal that would result in the manufacturer's investors owning a substantial majority of Workhorse's stock and include a significant debt refinancing.

Summary

• Workhorse Group Inc. is in discussions for a potential merger with a privately held U.S.-based electric commercial vehicle manufacturer.
• The Manufacturer would merge into a new Workhorse subsidiary, with its current investors receiving newly issued Workhorse common stock.
• Post-transaction, the Manufacturer's investors are expected to hold a substantial majority of Workhorse's outstanding common stock.
• The transaction includes a refinancing of Workhorse's outstanding senior secured convertible notes and cancellation of related warrants.
• The refinancing involves a new convertible note and an approximately $20 million sale-leaseback of Workhorse's Union City, Indiana manufacturing facility, both provided by entities affiliated with the Manufacturer's majority equity holder.
• Workhorse anticipates repaying its approximately $33 million outstanding obligations under the notes in full without redemption premiums or penalties.
• The institutional investor holding the notes and warrants would receive three million newly issued Workhorse common shares, subject to adjustment and trading restrictions, and their right to require additional notes would terminate.
• An exclusivity agreement for 14 calendar days was signed with the Manufacturer on July 14, 2025.

Sentiment

Score: 3

Explanation: The announcement details a complex potential merger and significant refinancing efforts, including a substantial dilution for existing shareholders. While the debt repayment without penalty is favorable, the overall necessity for such a transformative and dilutive transaction, coupled with the inherent uncertainties and risks, indicates a challenging financial and strategic position.

Positives

• Potential full repayment of outstanding senior secured convertible notes without redemption premium or penalty.
• Cancellation of all outstanding warrants, simplifying the capital structure.
• Securing new financing through a convertible note and a $20 million sale-leaseback, potentially improving liquidity.
• The potential merger with another EV manufacturer could lead to synergies and expanded market presence.
• The company is actively exploring strategic alternatives with investment banks and advisors.

Negatives

• Existing Workhorse shareholders face significant dilution, as the Manufacturer's investors are expected to hold a substantial majority of the combined company's common stock.
• The transaction is still in discussions; no final terms have been agreed upon, and no definitive agreements have been entered.
• Consummation is subject to multiple conditions, including Workhorse stockholder and Nasdaq approvals, which are outside the company's control.
• There is no assurance that the potential transaction, refinancing, or investor retirement will ever be consummated or will be on the terms described.
• The company will issue three million shares of common stock to the existing institutional investor as consideration for the note repayment and warrant cancellation, further contributing to dilution.

Risks

• The parties may not agree to pursue the Potential Transaction, or the terms may be materially different from those described.
• Inability to consummate the Potential Refinancing, Potential Investor Retirement, or the Potential Transaction.
• Failure to achieve expected synergies and/or efficiencies from the potential merger.
• Potential regulatory delays.
• Negative industry and market reaction to the announcement.
• Adverse effect of the announcement on the parties' ability to operate their businesses, retain and hire key personnel, and maintain favorable business relationships.
• Integration of the parties may be more difficult, time-consuming, or costly than expected.
• Operating costs and business disruptions may be greater than expected.
• Inability to obtain regulatory and other approvals required to consummate the Potential Transaction, including from Nasdaq.
• Volatility in the price of Workhorse securities due to various factors.
• Changes in laws, regulations, technologies, the global supply chain, and macro-economic and social environments affecting the business.
• Inability to maintain compliance with Nasdaq rules and otherwise maintain the listing of securities on Nasdaq.

Future Outlook

Workhorse Group Inc. is actively pursuing a strategic merger with a private EV manufacturer and a comprehensive refinancing plan to address its outstanding debt. The company anticipates that the manufacturer's investors will hold a substantial majority of Workhorse's stock post-merger, and it aims to maintain its Nasdaq listing. The successful execution of these plans is subject to definitive agreements, stockholder approval, and Nasdaq compliance, with no assurance of consummation on the terms currently discussed.

Management Comments

• The Company has entered into these discussions after exploring and considering a number of available alternatives with its investment banks and other advisors.

Industry Context

This announcement reflects a potential consolidation trend within the electric commercial vehicle sector, where smaller players or those facing financial challenges might seek strategic partnerships or mergers to gain scale, access capital, or streamline operations. The focus on debt refinancing and a sale-leaseback suggests a need to improve the balance sheet and liquidity, which is common for growth-stage EV companies that require significant capital investment.

Stakeholder Impact

• Shareholders: Existing shareholders face significant dilution as the Manufacturer's investors are expected to hold a substantial majority of the combined company. Stockholder approval is required for the transaction.
• Creditors (Institutional Investor): The institutional investor holding the notes and warrants would have their obligations repaid in full without premium and receive three million shares of common stock, while their right to issue additional notes would terminate and warrants would be cancelled.
• Employees: The announcement mentions risks related to the ability to retain and hire key personnel post-announcement and potential integration difficulties.
• Customers/Suppliers: Potential business disruptions and changes in operations due to integration could indirectly impact customers and suppliers.

Next Steps

• Continue discussions with the privately held U.S.-based manufacturer and the institutional investor regarding the potential transaction, refinancing, and investor retirement.
• Negotiate and potentially enter into definitive agreements for the Potential Transaction, Potential Refinancing, and Potential Investor Retirement.
• If definitive agreements are reached, file a proxy statement and other relevant documents with the SEC regarding the Potential Transaction.
• Seek approval from Workhorse's stockholders for the Potential Transaction.
• Seek approval from Nasdaq for the Potential Transaction and continued listing.
• Complete the Potential Refinancing, including the approximately $20 million sale-leaseback, simultaneously with the execution of a definitive agreement for the Potential Transaction.
• Repay approximately half of outstanding notes and cancel warrants at the Potential Execution Date.
• Repay remaining note obligations and issue New Investor Shares upon consummation of the Potential Transaction.

Key Dates

Recommendation

Keywords

Workhorse Group Inc., WKHS, Electric Commercial Vehicles, EV Manufacturer, Merger, Acquisition, Refinancing, Convertible Notes, Warrants, Sale-Leaseback, Dilution, Nasdaq Listing, Strategic Transaction, Debt Repayment, Share Issuance