Electric vehicle maker Workhorse this week issued a series of announcements with major implications for its stock price.
The firm also announced it was scrapping its C1000 electric delivery van line in favor of heavier focus on its W4 CC, W750 and W56 models, the latter of which is slated to enter production in 2023. In September 2021, it recalled 41 C1000 vehicles and suspended deliveries of new units.
Shares of Workhorse (NASDAQ: WKHS) rose sharply in premarket trading Wednesday morning before leveling off in the afternoon.
According to the company, the SEC notified Workhorse that its investigation had concluded and that no enforcement action was recommended. The inquiry, which was opened in September 2021, had scrutinized the company over claims of accounting fraud, nonexistent preorders and concealing a previous SEC investigation from investors, first reported by The Verge.
Separately, Workhorse faces a probe from the U.S. Department of Justice surrounding stock sales leading up to its awarding of a 10-year, $6 billion contract with the U.S. Postal Service. The company did not mention that investigation in Wednesday’s announcements.
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It did, however, explain its rationale for scrapping the C1000 line, citing excessive time, costs and resources being devoted to the project. The company has made a point of touting the vehicle’s big-name customers, like FedEx and UPS. But both of those companies, as well as others like Ikea, have alleged to the U.S. Department of Energy that the vehicles are unreliable.
The SEC also investigated allegations that Workhorse inflated sales numbers to investors by sharing fake preorders for the C1000 and other vehicles. The Verge reported, for example, that an order for 20 vans was placed by a company that appeared to have been set up just days prior and whose president was listed as an employee of Workhorse at the time.
But the agency didn’t uncover anything it deemed worthy of enforcement.
After removing the C1000 line, Workhorse expects to record a noncash inventory write-off of about $10 million, plus the cost of disposing of the existing vehicles. It did add, however, that previously delayed shipments of the W4 CC are now being shipped to Workhorse facilities.
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