Workhorse jumps as Cathie Wood’s Ark Invest buys the dip following more than 50% decline on USPS contract loss

Cathie Wood
Cathie Wood is the CEO and chief investment officer of ARK Invest, which runs three of the highest-returning stock ETFs of the last three years.

  • Cathie Wood’s Ark Invest was not fazed by the more than 50% decline in shares of Workhorse Group this week.
  • The ARK Autonomous Technology and Robotics ETF bought 660,500 shares of Workhorse on Wednesday.
  • Workhorse rallied as much as 9% in Thursday trades, but shares are still down significantly after the company lost out on a contract with the US Postal Service to rival Oshkosh.
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Cathie Wood’s Ark Invest viewed the more than 50% decline in shares of Workhorse Group this week as a an opportunity to buy the dip, evidenced by the firm’s purchase of shares on Wednesday.

Shares of Workhorse jumped as much as 9% in Thursday trades as Ark Invest disclosed in its daily trading e-mail that the firm’s Autonomous Technology and Robotics ETF purchased 660,500 shares of the EV company.

Workhorse Group plunged on Tuesday after it was revealed that a US Postal Service contract to electrify its fleet of trucks was awarded to rival Oshkosh. The contract could have represented more than $5 billion in potential revenue for Workhorse, according to an analysis from Bloomberg.

For a time, the electric vehicle maker Workhorse was thought to be a leader in the competition for the lucrative contract. The USPS commissioned five prototype postal service vehicles and Workhorse partnered with truck builder VT Hackney to produce their own.

But the ARK ETF’s purchase, worth about $10 million on Thursday, is a small bet relative to the fund’s other positions. Workhorse represents 0.25% of the fund, while top holding Tesla had a 10.5% weight in the ETF.

Workhorse has since pared gains and is trading up 2% as of 11:05 a.m.

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Workhorse extends 2-day slide to 57% after losing USPS contract to Oshkosh

Workhorse Truck
Workhorse Truck

  • Workhorse stock extended its two-day slide to 57% on Wednesday after losing a coveted USPS contract to Oshkosh Defense.
  • The electric vehicle maker was a front runner for the ten-year, multi-billion dollar USPS contract to modernize the delivery fleet.
  • Oshkosh received $482 million in the first part of the deal and expects to assemble 50,000 to 165,000 vehicles over the contract period.
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Workhorse extended its two-day slide to 57% on Wednesday after losing a coveted US Postal Service contract to Oshkosh Defense.

The company’s stock fell over 50% amid increased volatility after the news on Tuesday, triggering multiple trading halts before the stock recovered slightly, ending the day 47.5% lower.

The USPS awarded Oshkosh Defense the first part of a 10-year, multi-billion dollar contract to modernize the postal delivery fleet. An initial investment of $482 million will help finalize the design of the new vehicles for mail and package delivery, and allow Oshkosh to assemble 50,000-165,000 vehicles over the contract period.

The USPS made the agreement an indefinite-delivery, indefinite-quantity (IDIQ) contract, meaning that after an initial dollar commitment, the Postal Service will be able to order more vehicles throughout the 10-year contract period.

According to Bloomberg Intelligence analyst Christopher Ciolino, the total contract could be worth more than $5.7 billion in revenue for Oshkosh.

The USPS had been looking for a partner to help modernize its fleet of postal vehicles since 2015, but when Rep. Jared Huffman (D-CA) introduced the Federal Leadership in Energy Efficient Transportation Act in 2019 the postal service finally had the backing to narrow in on a deal.

For a time, the electric vehicle maker Workhorse was thought to be a leader in the competition for the lucrative contract. The USPS commissioned five prototype postal service vehicles and Workhorse partnered with truck builder VT Hackney to produce their own.

Analysts at BTIG said they saw Workhorse securing a portion of the USPS contract as a part of their base case scenario and held a “buy” rating on the company, per CNBC.

But now Oshkosh has secured the contract to make both fuel-efficient internal combustion engines and some battery-electric powertrains for USPS, leaving the pre-revenue EV startup Workhorse in a difficult spot.

In October of last year, short-seller Fuzzy Panda Research alleged that Workhorse destroyed its chances of landing the USPS contract.

According to the short-seller, there were numerous failures including suspension issues, motor outages, and even a parking brake malfunction that led to a postal worker injury.

Workhorse stock was down 9.14% as of 8:44 a.m. ET on Wednesday.

Workhorse chart
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US EV companies rally after Biden announces electric fleet plans for the federal government

Joe Biden
President Joe Biden waves after being sworn in during his inauguration on the West Front of the U.S. Capitol on January 20, 2021 in Washington, DC.

  • Shares of American EV manufacturers are roaring higher on Tuesday after President Biden announced the federal fleet is going electric.
  • Shares of Workhorse Group, Nikola, and Lordstown Motors all jumped double digits after the news broke.
  • The US federal fleet is made up of 645,000 vehicles which cost taxpayers some $387 million in fuel costs in 2019.
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US-based EV companies are rallying on Tuesday after President Biden announced the entire federal vehicle fleet will go electric with American-made products.

“The federal government also owns an enormous fleet of vehicles, which we’re going to replace with clean electric vehicles made right here in America, by American workers,” said Biden on Tuesday.

President Biden continued, “this would be the largest mobilization of public investment and procurement, infrastructure and R&D since World War 2.”

Shares of Workhorse Group, Nikola, and Lordstown Motors have all responded, jumping double digits after the announcement.

Read more: MORGAN STANLEY: Buy these 9 sports-betting stocks ahead of the industry’s expected legalization in 12 states this year and its growth to $10 billion in 2025

The US federal fleet comprises 645,000 vehicles, including 245,000 civilian vehicles, 173,000 military vehicles, and 225,000 post office vehicles.

Additionally, according to the Federal Fleet Report, the federal government spent over $386 million on fuel costs to run the fleet in 2019 alone.

The move by the Biden administrations continues the EV boom markets have witnessed over the past few years.

The Global X Autonomous & Electric Vehicles ETF saw 83% returns over the past year, while big names like Tesla have done even better, returning 193% to shareholders during the same period.

Now American EV manufacturers are seeing a spike in share prices after Biden’s announcement. Workhorse Group, Nikola, and Lordstown Motors saw their shares spike as much as 30%, 15%, and 19%, respectively.

Workhorse group may have benefitted more than its peers because the company was already in talks with the USPS to provide delivery vans, but the process stalled. Now investors are hoping the contract will be picked up again, and shares are responding.

Shares of Workhorse traded at $31.62 as of 11:50 am EST, giving the company a $2.98 billion market cap.

While shares of Nikola traded at $23.77 and shares of Lordstown Motors traded at $26.99. 

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