Shares of Workhorse Group (NASDAQ:WKHS) fell 52.9% in February, according to data provided by S&P Global Market Intelligence, after the U.S. Postal Service decided to look elsewhere when awarding a $6 billion vehicle contract. The loss doesn't doom Workhorse's business, but it does add to the challenges the start-up electric truck maker faces.
Workhorse has won some orders for its electric truck, but investors had bid the stock up by nearly 100% in the last six months on hopes that the company would secure a massive order to replace more than 150,000 Post Office delivery trucks over the next decade.
The Post Office had other ideas, on Feb. 23 announcing it had awarded Oshkosh an initial $482 million design contract to modernize its fleet. The 10-year contract is expected to be worth $6 billion in total. Workhorse shares lost a significant portion of their value after the contract was announced, and didn't recover much in the final days of the month as investors digested the news.
Workhorse has said it is considering protesting the award, a common step in government procurement, and intends to meet with Postal Service execs in the coming days to discuss the contract.
The entire contract always seemed a long shot for a company that only intends to manufacture 1,800 vehicles in 2021, but investors were hoping that Workhorse would at least get a slice of the order. The Postal Service appeared to favor Oshkosh because it has experience manufacturing at scale, and likely was drawn to the lower maintenance and upkeep expense of a uniform fleet.
Even without the Postal Service order, Workhorse has a backlog of more than 8,000 vehicles worth about $600 million in future revenue. The company still has the opportunity to become a solid long-term investment. But unless the Postal Service changes its mind, there will be no easy shortcut Workhorse can use to quickly gain manufacturing scale and relevance.