Workhorse Group, the electric vehicle company that grabbed headlines last month over a proposed deal to buy General Motors’ Lordstown, Ohio factory, has raised $25 million from a group of unnamed investors.
The money will not go toward the factory. Instead, it will be used for the more pressing matter of keeping the company running. Under terms of the deal, investors will receive preferred stock and warrants to buy shares. An annual dividend will be paid out in shares of Workhorse stock.
The Cincinnati-based company is small, with fewer than 100 employees. Its biggest problem isn’t ideas or even product pipeline; it’s capital.
Workhorse has struggled financially at various points since its founding in 1998. The company reported just $364,000 in revenue in the first quarter, down from $560,000 in the same period last year. As of March 30, 2019, the company had cash, cash equivalents and short-term investments of $2.8 million, compared to $1.5 million as of December 31, 2018.
Workhorse borrowed $35 million from hedge fund Marathon Asset Management earlier this year.
Workhorse, which was once owned by Navistar and sold in 2013 to AMP Holding, has a customer pipeline for its electric trucks that includes UPS. It’s also hoping to win a contract with the United States Postal Service.
But it needs capital to scale up. The funding gives Workhorse the capital to deliver on its existing backlog and produce its N-GEN delivery van, according to CEO Duane Hughes.
“We now have all necessary pieces in place to bridge Workhorse into full-scale N-GEN production and are looking forward to commencing the manufacturing process, in earnest, during the fourth quarter of this year,” Hughes said in a statement.
Meanwhile, GM has been in talks since early 2019 to sell its Lordstown vehicle factory in Ohio to Workhorse Group. GM’s Lordstown factory stopped producing the automaker’s Chevrolet Cruze in March; without any new vehicles slated for the factory, workers were laid off.
Under the potential Lordstown deal, a new entity led by Workhorse founder Steve Burns would acquire the facility. Workhorse would hold a minority interest in the new entity. This new entity would allow Workhorse to seek new equity without diluting existing shareholder value.
Workhorse would build a commercial electric pickup at the plant if the deal goes through, Hughes has said.