DEFM14A: Workhorse to Merge with Motiv, Facing Dilution & Debt

Workhorse Group Inc. announces a definitive merger agreement with Motiv Power Systems, Inc., leading to significant dilution for existing Workhorse stockholders and a new financial structure.

Summary

• Workhorse Group Inc. (WKHS) will merge with Motiv Power Systems, Inc. (Motiv), with Motiv becoming an indirect, wholly-owned subsidiary of Workhorse.
• Existing Workhorse stockholders will own approximately 26.5% of the Combined Company on a fully-diluted basis, prior to the effects of an Equity Financing and Convertible Financing.
• Pre-Merger Motiv investors will initially own approximately 62.5% of the Combined Company, and Workhorse's convertible noteholders will hold rights to receive approximately 11% of Workhorse.
• The merger is subject to Workhorse stockholder approval of key proposals, including a stock issuance, a reverse stock split (1-for-8 to 1-for-12 ratio), an incentive plan increase, and charter amendments.
• Motiv's controlling stockholder, Motive GM Holdings II LLC, will provide up to $20 million in debt financing at closing and has already provided a $5 million Subordinated Secured Convertible Note to Workhorse.
• Workhorse will redeem approximately $24.1 million of its 2024 Notes at closing and issue rights to the 2024 Note Holders for 30% of fully diluted shares in exchange for existing warrants.
• The Combined Company's board will consist of seven members (two from Workhorse, five from Motiv), and Scott Griffith (current Motiv CEO) will become the CEO of the Combined Company.
• Both Workhorse and Motiv have a history of significant losses and negative cash flows, with Workhorse explicitly stating "substantial doubt" about its ability to continue as a going concern.
• BTIG, LLC provided a fairness opinion to the Workhorse Board, concluding that the issuance of the Merger Consideration is fair, from a financial point of view, to Workhorse.

Sentiment

Score: 3

Explanation: The merger provides a strategic lifeline for two financially distressed EV companies, but the terms involve significant dilution for existing Workhorse shareholders, continued projected losses, and a 'controlled company' governance structure. The high risks and uncertain path to profitability outweigh the strategic rationale for current Workhorse investors.

Positives

• The merger creates a larger entity with increased scale and resources, potentially enhancing competitiveness against larger industry players and improving negotiating power with suppliers and customers.
• The transaction provides Workhorse with $25 million in immediate liquidity from the Sale Leaseback and Convertible Note, plus up to $20 million in committed debt financing post-merger.
• The Combined Company is expected to benefit from complementary customer bases and sales/marketing strategies, and achieve substantial cost synergies prior to December 31, 2026.
• The Combined Company will possess an extensive product portfolio, including Class 4-6 trucks and buses, which is viewed positively for market opportunity.
• The Workhorse Board believes the merger offers a more favorable outcome for stockholders than remaining a standalone company or pursuing liquidation.
• The $30 million equity value ascribed to Workhorse in the merger provides existing stockholders an opportunity to participate in the potential growth of the Combined Company.

Negatives

• Existing Workhorse stockholders will experience significant dilution, owning only approximately 26.5% of the Combined Company on a fully-diluted basis, prior to additional financings.
• The Combined Company will likely be a "controlled company" under Nasdaq rules, potentially reducing corporate governance protections for minority shareholders.
• Both Workhorse and Motiv have a history of substantial losses and negative cash flows, with Workhorse explicitly facing "substantial doubt" about its ability to continue as a going concern.
• The Combined Company is projected to incur operating losses for the foreseeable future, indicating a challenging path to profitability.
• The necessity of a reverse stock split to maintain Nasdaq listing highlights underlying share price weakness and may not guarantee long-term price stability or liquidity.
• Workhorse is subject to a $1.05 million termination fee payable to Motiv under certain circumstances, which could deter superior alternative proposals.
• Motiv's revenue decreased by 58% in 2024 compared to 2023, and it incurred a $6.2 million impairment loss on a discontinued product line investment in 2024.
• The lack of a public market for Motiv's stock makes it difficult to independently evaluate the fair market value of its capital stock, potentially leading to an overvaluation in the merger terms.

Risks

• Substantial doubt exists regarding Workhorse's ability to continue as a going concern, dependent on additional financing and the merger's outcome.
• Inability to generate or obtain additional capital could impair the Combined Company's ability to meet customer needs or expand operations.
• The unavailability, reduction, or adverse application of government subsidies and incentives could negatively affect demand for electric vehicles.
• Uncertain global macro-economic and political conditions, including inflation, interest rates, and geopolitical events, could adversely affect financial results.
• Trade tariffs or other trade barriers could increase costs for raw materials and components or reduce demand for vehicles.
• Failure to successfully execute Workhorse's business plan, including the W56 vehicle chassis platform, would have a material adverse effect.
• Delays in launching and ramping up production or inability to control manufacturing costs could harm the business.
• The Combined Company may not achieve or maintain profitability in the future, continuing to incur significant losses.
• If vehicles fail to perform as expected, the ability to develop, market, and sell electric vehicles could be harmed, leading to product liability claims or recalls.
• Dependence on a limited number of customers and lack of long-term agreements pose risks to future sales.
• Regulatory requirements, including changes in emissions and fuel economy standards, could negatively impact the business.
• Workhorse and Motiv have identified material weaknesses in internal control over financial reporting, which could impair accurate and timely financial reporting.
• The market price of the Combined Company's common stock is expected to be volatile, and the reverse stock split may not increase the stock price long-term or prevent a decrease in overall market capitalization.
• Significant dilution for existing Workhorse stockholders and reduced influence over management due to the Combined Company's "controlled company" status.
• The merger may be completed even if a material adverse effect occurs due to certain exclusions in the merger agreement.
• Workhorse will have no right to make damage claims against Motiv for breach of representations or warranties after the closing of the merger.
• The Combined Company may incur a significant amount of consolidated indebtedness, reducing business flexibility and increasing demands on cash resources.
• The Combined Company's ability to use net operating loss carryforwards and other tax attributes will be limited as a result of the merger.

Future Outlook

Workhorse expects to continue incurring net losses in 2025 and plans to launch a second-generation vehicle chassis platform in late 2026 or 2027. Motiv anticipates increased operating losses in the future due to investments in technology and manufacturing capacity, with an objective to achieve positive operating and cash flow levels within the next few years. The Combined Company is projected to incur operating losses for the foreseeable future but aims for substantial cost synergies by December 31, 2026, and plans to raise an additional $55 million through a PIPE financing by the first fiscal quarter of 2026.

Management Comments

• The Workhorse Board unanimously approved the Merger Agreement, determining it is advisable and in the best interests of Workhorse and its stockholders to consummate the Merger and related transactions.
• The Workhorse Board unanimously recommends that its stockholders vote FOR all proposals described in the proxy statement.
• The Workhorse Board believes that the greater number of authorized shares of Workhorse Common Stock is desirable for the Combined Company to have sufficient shares for the issuances to the Motiv investors in the Merger, to the investors in the Equity Financing, to the Convertible Note Holder upon the conversion of the Convertible Note, and under the Restated 2023 LTIP.
• Motiv is committed to making continued progress in its product development by enhancing its products and developing the next evolution of its offerings.
• Motiv's management believes recent additions to its leadership team will be instrumental in scaling the business and accelerating EV adoption.

Industry Context

The electric vehicle (EV) industry, particularly the medium-duty commercial sector, is characterized by rapid technological changes, intense competition, and evolving government regulations and incentives. Adoption of electric delivery vehicles has been slower than anticipated. The merger aims to create a larger entity with increased scale and resources to better compete with established OEMs and new entrants, leveraging complementary customer bases and sales strategies. The industry faces uncertainty from macroeconomic conditions, supply chain disruptions, and shifts in U.S. regulatory policies regarding emissions and EV incentives.

Comparison to Industry Standards

• BTIG's fairness opinion utilized a selected public companies analysis, comparing the Combined Company to Rivian Automotive, Inc., Blue Bird Corporation, Xos, Inc., Green Power Motor Company Inc., and Cenntro Inc.
• The analysis derived implied enterprise values as a multiple of estimated revenue for fiscal years 2027 and 2028, with mean peer group multiples of 0.9x (FY27E) and 0.7x (FY28E), and median peer group multiples of 1.0x (FY27E) and 0.6x (FY28E).
• The implied per share equity value for the Combined Company, ranging from $3.0 to $4.4 (FY27E) and $3.5 to $4.4 (FY28E), suggested a premium of 69% to 147% over Workhorse's closing price of $1.77 on August 14, 2025.
• BTIG noted that Workhorse and Motiv have similar business models and products targeting the same market, leading to the use of the same comparable companies and weighted average cost of capital for discounted cash flow analysis.

Management Changes

Corporate Governance

Legal Proceedings

• Workhorse is a defendant in a complaint filed by Coulomb Solutions Inc. on April 19, 2024, in the U.S. District Court for the Eastern District of Michigan, concerning batteries.
• Workhorse has received several demand letters from purported stockholders alleging failures to disclose material information in the preliminary proxy statement related to the merger.
• Motiv filed an administrative Trademark Trial and Appeal Board (TTAB) opposition to Motive Technologies, Inc.'s trademark application on May 8, 2023.

Related Party Transactions

• Motiv's controlling stockholder (Motive GM Holdings II LLC) will provide up to $20 million in debt financing to Workhorse at closing.
• Workhorse Motor Works Inc. (a Workhorse subsidiary) sold its Union City, Indiana manufacturing facility to an affiliate of Motiv's controlling stockholder for $20 million and leased it back for 20 years at $2.1 million annual rent (abated for six months).
• Workhorse issued a $5 million Subordinated Secured Convertible Note to Motive GM Holdings II LLC on August 15, 2025, bearing 8% interest, convertible at 90% of the Equity Financing price.
• Motive GM Holdings II LLC was granted the right to appoint one director (Alan Henricks) and one board observer (Paul Savoie) to the Workhorse Board.
• Motiv's controlling stockholder entered into a Support Agreement, committing to vote its shares in favor of the merger.
• Workhorse will enter into a Registration Rights Agreement with Motiv's controlling stockholder for the resale of Workhorse Common Stock received in the merger.
• Motiv has a Senior Secured Promissory Note with its controlling shareholder (Motive GM Holdings II LLC) with an outstanding balance of $93.8 million as of June 30, 2025, bearing 20% interest, which is expected to be satisfied by merger proceeds.
• Motiv previously converted $60 million in convertible notes from its controlling shareholder into Series A Preferred Stock on June 14, 2024.
• Workhorse has an insurance relationship with AssuredPartners NL, LLC, a subsidiary of AssuredPartners Capital, Inc., where a former Workhorse director is CFO of a subsidiary. Assured earned $150,000 in brokerage fees in 2024 and $300,000 in 2023.

Stakeholder Impact

• Workhorse shareholders will experience significant dilution, with their pro forma ownership reduced to approximately 26.5% (pre-additional financings), and will have reduced corporate governance protections due to the 'controlled company' status.
• Motiv's equity holders are expected to receive no distribution from the merger, as all consideration will be used to satisfy Motiv's outstanding debt.
• Workhorse's current executive officers are expected to be terminated, while Motiv's senior management will assume key leadership roles in the Combined Company.
• Creditors of both companies will see a restructuring of debt, with Workhorse's 2024 Notes being redeemed and Motiv's debt being converted into Workhorse Common Stock.
• The Combined Company aims to offer a more stable and scaled platform, potentially benefiting customers through a broader product portfolio and improved ability to fulfill orders.
• Employees of both companies face uncertainty regarding future roles and equity awards, with Workhorse stock options being cancelled for no consideration and other unvested awards accelerating.

Next Steps

• Workhorse stockholders will vote on the merger-related proposals at the annual meeting on November 12, 2025.
• The merger is expected to close in the fourth quarter of 2025, subject to stockholder approval and other closing conditions.
• Workhorse intends to file an initial listing application for the Combined Company with Nasdaq.
• Workhorse and Motiv will use commercially reasonable efforts to effect an equity financing (PIPE transaction) for the Combined Company.
• The Combined Company's executive team will be identified and agreed upon by Workhorse and Motiv prior to the closing.
• Workhorse plans to begin production of its second-generation, low-floor vehicle chassis platform in late 2026 or 2027.

Key Dates

Recommendation

The merger, while a strategic attempt to stabilize two financially distressed electric vehicle companies, presents substantial risks and unfavorable terms for existing Workhorse shareholders. The projected dilution of Workhorse shareholders to approximately 26.5% (before further capital raises) is significant. Both Workhorse and Motiv have a history of considerable losses and negative cash flows, with Workhorse explicitly acknowledging 'substantial doubt' about its ability to continue as a going concern. The necessity of a reverse stock split to maintain Nasdaq listing underscores the precarious financial health. Furthermore, the Combined Company will operate as a 'controlled company,' potentially limiting the influence and protections for minority shareholders. Given the high financial risk, the extent of dilution, and the uncertain path to profitability, a seasoned investor would likely recommend selling or avoiding this stock.

Keywords

Electric Vehicles, Commercial Trucks, Merger, SEC Filing, Workhorse Group, Motiv Power Systems, Reverse Stock Split, Dilution, Going Concern, Debt Financing, Equity Financing, Nasdaq Listing, Corporate Governance, EV Industry, Last-Mile Delivery