LOS ANGELES — A Workhorse Group investor has sued the Ohio electric vehicle-maker and its top executives, accusing them of misrepresenting the company’s chances of landing a multi-billion dollar contract to develop the U.S. Postal Service’s new fleet vehicles.
The Cincinnati-based company — which also has a 10-percent equity stake in Lordstown Motors Corp. — was one of three finalists for a $6.3-billion contract to build the postal service’s Next Generation Delivery Vehicles.
The postal service, however, last month awarded that contract to OshKosh Defense of Wisconsin, causing Workhorse shares to lose about $2 billion in value, according to the New York Times.
Investor Sam Farrar, whose attorneys filed the class action lawsuit Monday in California’s Central District U.S. Court, claimed Workhorse’s CEO Duane Hughes and CFO Steve Schrader made misleading comments to media outlets in stock market reports and failed to disclose that the company had no assurance it would be awarded the contract and that electrifying the postal service’s fleet would be “impractical and astronomically expensive.”
Read the full complaint below. To view a full-size version, click the icon in the upper-right:
Postmaster General Louis DeJoy told a House committee on the day the Oshkosh award was announced that the postal service would need “3 or 4 extra billion” dollars to make 90 percent of its fleet electric.
Workhorse was the only company to propose all-electric vehicles, something federal lawmakers said last week should have factored into the postal service’s award decision. Under OshKosh’s proposal, only 10 percent of the vehicles would be electric.
The class-action lawsuit seeks to recover damages for any of the hundreds or potentially thousands of stock traders who purchased Workhorse shares between July 7, 2020 and Feb. 23, 2021, shares which the lawsuit claims were artificially inflated by Workhorse executives’ comments.
Hughes sold more than 568,000 of his shares in the company for more than $14 million in that timeframe, according to the suit. Likewise, Schrader sold more than 15,000 of his shares for more than $332,000.
The suit alleges violations of certain portions of the Securities Exchange Act of 1934 which govern false or misleading statements about securities and the withholding of adverse information about the company.
Shares of Workhorse (NASDAQ: WKHS) have been on the rise since Monday, presumably influenced by Monday reports that federal lawmakers want to give the postal service an additional $6 billion to modernize its fleet, legislation supported by U.S. Rep. Tim Ryan of Howland, D-13th.
Shares of OshKosh (NASDAQ: OSK) rose more than 15 points to $112.95 following the postal service award announcement on Feb. 23.
About $54 million in OshKosh shares were purchased the day before the award was announced, however, prompting Ryan to request an SEC investigation.
Meanwhile, Ryan on Tuesday joined U.S. Reps. Marcy Kaptur of Toledo, D-9th, and Jared Huffman of California, D-2nd, in a new House resolution calling on the White House to stop the OshKosh deal.
The resolution also calls for an investigation to ensure "there was no inappropriate political influence" in the postal service's contract decision and that the contract is "consistent" with President Joe Biden's executive order on climate change, which calls for electrification of all federal fleet vehicles.
“It is far past time to bring the United States Postal Service into the 21st century,” said Ryan in a statement first delivered to Mahoning Matters Monday evening.
“There is no question that electric is the future of the automotive industry. President Biden knows this, and that is why he signed an Executive Order to electrify our federal fleet. Currently, over 141,000 of the aging postal trucks average only 10 miles per gallon. These trucks are at the end of their operational lifespan and we need to buy new ones — so why wouldn’t we go electric?"
A letter to the White House penned last week by Ryan, Kaptur and U.S. Sen. Sherrod Brown of Cleveland, D-Ohio, calls DeJoy's tenure as postmaster general into question.
“DeJoy’s problem-riddled tenure calls into question the awarding of a contract critical to the future success of the postal service, at a time when he has already struggled mightily to lead,” Kaptur said in a statement Tuesday. “It does not make sense why USPS would go through all the trouble of reimagining their fleet, yet put its collective head in the sand when it comes to internal combustion versus future propulsion platforms.
“This contract is a multi-billion dollar opportunity to reimagine the federal fleet and develop this critical domestic supply chain. We can’t fumble it."
Huffman introduced Monday's resolution to earmark $6 billion for the postal service to make at least 75 percent of its new fleet purchases electric. Ryan and Kaptur are co-sponsors.
“The recent United States Postal Service contract with OshKosh completely misses the mark — it doesn’t meet national climate goals, it’s inconsistent with federal guidelines, and there is real concern of inappropriate political influence on the decision-making process,” said Huffman.