Shares of Cincinnati-based electric-powered delivery and utility vehicle maker, Workhorse surged on June 3 and minted it as the latest addition to the meme-stock club. This activity looks to be an apparent short squeeze brought on by members of the now prominent Reddit investing group, WallStreetBets.
Workhorse shares climbed as much as 59 percent on June 3, which is the most significant intraday increase since May 2019. By mid-day, the shares fell slightly but maintained their price increase. Perhaps the latest meme-stock joining GameStop, AMC, and Blackberry, Workhorse looks to be caught in the middle.
Workhorse’s rally wasn’t brought on by any substantial news.
A relatively unknown player in the electric vehicle space, Workhorse hasn’t enjoyed much of the industry attention like other automakers. Understandably, it’s difficult to outshine Tesla and its boisterous CEO, Elon Musk. Even GM announcing a full-on adoption of electric vehicles is hard to beat.
However, this didn’t stop a frenzy of activity towards Workhorse shares this week. According to analysts, the pre-market trading volume is double its average, while trading in its call options quadrupled.
The company is still in the pre-production phase and has the numbers to match.
While Workhorse hasn't brought any vehicles to market yet, investors quickly jumped on board last year. The share prices soared from its 2016 IPO price of $6.89 to as much as $30.60 by mid-2020.
The shares have come back down dramatically in 2021 as more automakers revealed extensive rollouts of electric vehicles. Backed by enormous production capacity, unlimited resources for research and development, and established market presence, the competition seems to sway investors away from the start-up automaker.
Workhorse’s latest earnings report opened the door for short-sellers.
In its first-quarter earnings call in early May, Workhorse disclosed a net loss of $120.5 million compared to net income of $4.8 million in the same period last year. According to the company, this is mainly driven by an increase in research and development to $3.9 million compared to $1.9 million in the same period last year.
Despite the lower financial data due to Workhorse’s expanding its R&D and a hoard of cash still on hand, investors are still holding short positions in the company. They are betting on the business failing rather than succeeding in its venture.
Financial analytics firm S3 Partners revealed that nearly 48 percent of Workhorse’s free float is now held short. The high percentage of short positions might be attracting retail investors. This sounds all too familiar. With social media postings on Workhorse unusually high and several tweets talking about a potential short squeeze, retail investors who have been looking for the latest GameStop to get in on the ground floor might have found their latest meme stock. However, it’s still too early to predict just how Workhorse’s short-squeeze will play out and who the winners and losers will be.