The United States Postal Service revealed last month that it had chosen Oshkosh Defense to make the next USPS mail truck, which meant that Workhorse, another bidder for the contract, lost. And with that loss came a steep drop in Workhorse’s stock price. Now one investor has sued.
The suit, filed Monday by Sam Farrar in U.S. District Court in California, alleges fraud, and highlights a number of quotes from Workhorse executives ahead of the USPS’s announcement on February 23. The quotes are intended to show that Workhorse led investors on about the possibility of getting all or part of the USPS’s contract for new mail trucks, inflating its stock price as a result.
For example, here’s what Workforce’s CFO Steve Schrader said less than a month before the USPS announcement, as quoted in the lawsuit. (Emphasis added in the lawsuit.)
On January 28, 2021, CFO Schrader sat down for an interview with the host of a popular Youtube channel focused on investing in the stock market. The pertinent part of that conversation is as follows:
HOST: So Workhorse has been doing fantastic things as of late, over the last month or so in particular, and there’s a few things I really want to speak about today. Now the first one is, Steve, I’d just like to hear your thoughts on Biden saying that the entire federal fleet will be replaced with electric vehicles, specifically American electric vehicles. And I know we can’t speak about the USPS contract, even though that’s what the entire comment section is probably asking us about, but I’d just like to get your thoughts on his statements and what it could potentially mean for Workhorse going forward.
SCHRADER: Yeah, I think the President’s announcement was huge, for several reasons, right? It’s, one, supportive of the E.V. (“electric vehicle”) market. It’s, two, all-American, like you said, all-American product buy. And I think he also said a lot about small businesses, and purchasing, whether it be parts or final products, from small businesses, too. So I think that’s huge. I think it’s meaningful that he did this his fifth day into his presidency, right? He did it quickly; he didn’t really wait and so I think that, putting a move on that was very quick too. I think it’s also meaningful that, when you think about it, when the government gets behind things, things happen.
And in this case, it’s, the government actually is maybe somewhat behind the commercial market. As you well know, customers are already demanding these products, right? Investors are already looking at companies that are making these products, so I think everybody sees that E.V.s are kind of the way of the future going forward, and they see – customers see – the savings opportunities and I think what probably has, the only thing that has been missing, to some extent, is that now you’ve got the government behind it, from a standpoint of environmental, you know, and just – savings opportunities going forward. So, yeah, having the government push us and the President come out, like I said, five days after his inauguration, is huge.
HOST: It was nice and quick. And as you just said, I think that’s exactly what we wanted to see. I mean, we’ve spoken a few times now and you’ve made it very evident that a lot of the people who actually want to buy these trucks – I think every fleet manager in the country at this stage is now heavily contemplating E.V. more so than traditional vehicles, from a savings point of view. I think the government to an extent were a little bit behind, so they’re seeing something like this come from the President himself, that has to be a huge catalyst to pretty much everybody involved, especially the all-American owned ones, which we know you guys stand very heavily for. So that’s awesome; that’s just awesome. And that, obviously, it’s a very good thing.
SCHRADER: Yes. It’s a very good thing . . . .
Now, you can read that as Schrader intimating that Workhorse thinks its chances of getting the USPS contract are good, or you can read that as Schrader simply saying that the U.S. government putting its weight behind electric cars is good in general for Workhorse, an EV company. But it’s somewhat gray, and it’s in the gray where lawsuits like this often operate.
I emailed Workhorse and will update this post if they reply. The company said last week that it had met with the Postal Service and, well, stay tuned.
Yesterday’s meeting with the USPS marked the first step in what we expect may be a prolonged process to explore our options and possibly pursue further action related to our NGDV bid,” said Workhorse CEO Duane Hughes. “We will continue to follow the proper due course procedures as defined by the USPS and will also look to other options available to us. In the interim, we have retained the services of leading legal and corporate advisory firms, including Akin Gump Straus Hauer & Feld LLP and Mound Cotton Wollan & Greengrass LLP, to identify our options and pursue them effectively. We appreciate the support of the many private and public stakeholders who have expressed an interest in supporting us and will continue to share updates as we are able.
You can read Farrar’s full complaint below.