00:00 In 2021 Workhorse stock soared to over $40 a share on optimism that it would win a $6
00:06 billion contract with the United States Postal Service. However the manufacturer of electric
00:11 trucks lost out to a company called Oshkosh Defense. As a result the share price collapsed
00:17 and today Workhorse has a valuation of $216 million. With $89 million of cash and investments
00:24 and no debt the enterprise value is only $127 million. The issue is that electric vehicles
00:30 are costly to make and Workhorse is nowhere near to making money. It produced only $7
00:35 million in revenue over the last 12 months while reporting a net loss of $120 million
00:40 and negative free cash flow to the tune of $115 million. The company burned through $38
00:46 million in the first quarter so with only $79 million of cash left Workhorse is dangerously
00:52 close to bankruptcy. To survive the company needs to raise more capital but with a market
00:57 cap below $300 million it's hard to raise enough money without further tanking the stock.
01:03 The company did raise $19 million in Q1 but that just doesn't seem enough when the company
01:08 is losing almost double that. This has been an incredibly unreliable company. It entered
01:13 the EV market back in 2007 and between 2007 and 2019 it delivered only 365 vehicles. There
01:22 are also allegations of fraud and insider trading. That said the company got new management
01:27 in 2021. The new CEO Rick Dauk has a good track record from Delphi Technologies and
01:33 CFO Bob Ginnan said on the Q1 call that he thinks the company does have enough cash to
01:38 last until the end of the year. And just recently the share price has shown some signs of a
01:43 positive life. In fact the company managed to deliver 10 vans in Q1 and according to
01:48 the company conference call it delivered another 40 in May. On top of that the company has
01:53 finally received some orders for its aerial delivery drone Horsefly. The question is whether
01:58 the company has left it too late to turn around. With so little cash remaining the most likely
02:04 outcome is probably bankruptcy. But there's still a small chance of success and this stock
02:09 also has meme stock potential. It's got a high short interest and if recent momentum
02:14 continues the stock could easily provide some upside for meme traders. For now I give the
02:19 stock a neutral rating because it's too risky to buy it long term and too dangerous to short.
02:24 But these are my personal opinions not financial advice and I've currently got no position
02:29 in Workhorse stock. For more detailed investing ideas make sure to visit our website I Overlooked
02:34 Alpha.com
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