Shares of last-mile delivery company Workhorse Group (NASDAQ:WKHS) are spiking higher this morning after the company announced a new $70 million financing deal. As of 10:30 a.m. EDT, the stock was up 28% and still climbing.
Investors clearly see an opportunity with Workhorse, judging by the stock's mind-blowing gains in 2020. And this financing deal was crucial to the company's long-term viability.
Workhorse is an early-stage company specializing in electric vehicles for last-mile delivery. Some other young automotive companies are still in an idea phase of development. By contrast, Workhorse has already established a business relationship with delivery services like United Parcel Service and the U.S. Postal Service. And its business generated $84,000 in sales in the first quarter of 2020.
However, Workhorse is still very young and very unprofitable. In Q1, it posted a $8.3 million loss from operations. The main problem with that is the company only had $16.8 million on the balance sheet. At that pace, it would be out of cash by the end of fiscal 2020.
Today, Workhorse announced a financing deal for senior secured convertible notes that will net the company $69 million. CEO Duane Hughes said this financing will give the company financial flexibility and enable it to meet its goals for 2020. It still plans to produce and deliver 300 to 400 vehicles this year.
For now, Workhorse has secured the financing it needs to continue pursuing its goals. But given how young the company is, and how far it is from profitable operations, I bet it will return for additional financing at some point. It still has a long way to go to address the $18 billion last-mile delivery market.