Shares of Workhorse Group (NASDAQ:WKHS), a start-up manufacturer of electric trucks whose stock has surged in hopes it's about to win a large contract from the U.S. Postal Service, is galloping in the wrong direction this morning. As of 11 a.m. EST, the stock is down 12%.
We know at least one reason why Workhorse Group stock has been going up -- but why is it now going down?
One possibility is WallStreetBets. Coincident with a huge surge in stock price at Workhorse last week was the WSB phenomenon that saw a mass of new investors on trading app Robinhood combine with stock boosters on the Reddit forum to push shares of heavily shorted stocks higher. Although not one of the most popular names cited by the Reddit users, Workhorse stock does have a very high short interest -- nearly 28%. It's entirely possible that WSB, therefore, was behind much of Workhorse's rise last week.
Now here's why that could be a problem today: Robinhood said late last week that it was limiting trading for certain stocks because it lacked the cash to meet deposit requirements imposed by its securities clearinghouse. And while Workhorse is not on Robinhood's latest list of five stocks subject to these limitations, it was reported on TheFly.com this morning that Workhorse stock still numbers among companies under unspecified "share and/or options contract restrictions."
Conclusion: Workhorse stock may be going down because Robinhood is limiting investors' ability to bid it up.
Now here's the good news for folks who own Workhorse: Robinhood announced yesterday that it has secured $3.4 billion in financing "to invest in record customer growth, including $1 billion in funding announced on January 29." The company had previously explained that the trading restrictions it imposed were due to "deposit requirements" imposed by its securities clearinghouse.
But if the company has now accumulated enough cash to meet its deposit requirements, it's possible that any trading restrictions currently imposed on Workhorse stock could be about to disappear. All else being equal, this should lessen downward pressure on the stock, and permit the stock to rise again.
That is, assuming it wins the USPS contract.