Workhorse Group Inc. ( WKHS ) shares sank Monday after the company disclosed it is negotiating a potential merger with a privately held U.S. manufacturer of electric commercial vehicles.

Under the proposed structure, the target company would be merged into a new Workhorse subsidiary in exchange for newly issued shares of Workhorse stock.

If the transaction proceeds, investors in the private company would hold a majority stake in the combined entity. The companies intend for Workhorse’s shares to remain listed on Nasdaq, pending regulatory and shareholder approvals.

Also Read: Workhorse Misses On FY24 Revenue And EPS, But Cost Cuts Narrow Losses

The discussions also include a refinancing plan to eliminate Workhorse’s $33 million in outstanding convertible notes. This plan involves a new convertible note, a $20 million sale-leaseback of its Union City, Indiana facility, and the cancellation of warrants held by an institutional investor. In return, the investor would receive 3 million new shares, some of which may be subject to trading restrictions.

These steps are expected to occur concurrently with a final agreement. Workhorse signed an exclusivity agreement on July 14, barring negotiations with other parties for 14 days, unless a better offer arises.

No definitive agreements have been reached, and there is no guarantee that the transaction or related financing will close.

Recent Volatility and Strategic Challenges

On July 9, Workhorse shares traded at nearly triple their 50-day average volume, despite being down more than 62% year to date. The company missed revenue expectations in recent quarters but narrowed its gross loss in the first quarter of 2025. CEO Rick Dauch said Workhorse aims to sell more vehicles in the second quarter of 2025 than in 2024 while cutting costs and extending its cash runway.

Workhorse completed a 1-for-12.5 reverse stock split in March to regain Nasdaq compliance. Broader EV industry headwinds, such as the phase-out of the federal $7,500 EV tax credit under the Trump-backed “Big Beautiful Bill”, could influence pricing decisions and demand going forward.

Related ETFs: Global X Autonomous & Electric Vehicles ETF ( DRIV ) , iShares Self-Driving EV and Tech ETF ( IDRV ) .

Price Action: WKHS shares are trading lower by 20.8% to $3.50 at last check Monday.

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