Workhorse Secures $200M Financing To Boost Production; Shares Up 774% YTD

Workhorse on Monday said that it has secured $200 million in financing through entering into a note purchase agreement (NPA) with two institutional lenders to increase production volumes. Under the NPA, the drone-integrated electric vehicle manufacturer will sell $200 million worth of senior notes carrying an annualized interest rate of 4% and maturing in 2024.

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Apart from accelerating production volumes, Workhorse (WKHS) intends to use the proceedings to “advance new products to market, replace previous higher cost financings, and support current working capital and other general corporate purposes.” According to the NPA, the company can pay interest in cash or stock and the interest rate could be reduced to 2.75% upon meeting certain conditions.

The company expects to generate $194.5 million in net proceeds from the notes offering. The NPA deal provides lenders with an option to exchange the notes for company stock at $36.14 per share, a 35% premium to the October 9 closing price of $26.77. (See WKHS stock analysis on TipRanks).

On Sept. 2, Oppenheimer analyst Colin Rusch initiated coverage on Workhorse with a Buy rating and a price target of $23 (14.1% downside potential). In his note to investors, Rusch wrote, “With multiple catalysts in front of the stock, including the potential for an award from the US Postal Service, ramp of licensee Lordstown Motors, and delivery against its own pipeline of orders, we see WKHS shares as having short-term upside with optionality on long-term growth.”

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 3 Buys and 1 Hold. With shares up over 774% year-to-date, the average price target of $25.33 implies downside potential of 4.7% to current levels.