Workhorse Group Plummets 39%—What’s Driving the Freefall?

• WKHS stock collapses 39.59% to $2.67, hitting an intraday low of $2.65
• Company announces potential merger with a private EV manufacturer, risking shareholder dilution
• RSI spikes to 97.10—extreme overbought territory signaling panic selling
• Sector leader Tesla (TSLA) rises 0.72%, contrasting sharply with WKHS’s rout

Workhorse’s stock has cratered in historic fashion, with the sharpest single-day drop in its history, triggered by a bombshell merger announcement laden with execution risks. The company’s shares have been swept into a liquidity crisis as investors digest the implications of a potential reverse recapitalization and debt restructuring, while broader EV sector trends remain mixed.

Potential Merger and Debt Restructuring Shake Investor Confidence
The precipitous drop stems directly from Workhorse’s disclosure of merger talks with a private EV manufacturer. The proposed deal would see existing Manufacturer investors gain a majority stake in the combined entity, while simultaneously refinancing $33M in convertible notes via a $20M sale-leaseback of its Indiana facility. Investors are recoiling at the dilution risk and execution hurdles: no definitive agreement exists, Nasdaq listing compliance remains uncertain, and shareholder approval is required. The forward-looking caution in the press release—emphasizing risks like regulatory delays and conversion pressures—has amplified uncertainty, driving short-term capital flight.

EV Sector Mixed as Workhorse’s Plunge Contrasts with Tesla’s Steady Gains
While Workhorse’s shares crater, sector leader Tesla (TSLA) edges up 0.72% amid autonomous driving news, highlighting the divergent dynamics within the EV space. Broader auto sector headlines—ranging from China’s market surges to Stellantis’ production cuts—show no direct causal link to WKHS’s collapse. This stock’s move is idiosyncratic, tied to its unique corporate restructuring challenges rather than broader industry trends. Investors are distinguishing between companies with solid execution track records and those navigating existential capital structure changes.

Bullish Technicals Collide with Bearish Fundamentals—Options Highlight Volatility
Technical Indicators:
• RSI: 97.10 (extreme overbought)
• MACD: 0.5695 (above signal line 0.2621)
• Bollinger Bands: Below middle band (1.55)
• 200-day MA: 0.9924 (current price is 275% above this)

A short-term bearish setup emerges despite bullish momentum indicators. The RSI overhang suggests profit-taking pressures, while the Bollinger Band positioning signals potential mean reversion toward the middle band. Aggressive traders might fade the overbought condition, targeting the $2.65 lows as support.

Top Option Picks:
1. WKHS20251017P2 (Put, $2 Strike)
• Implied Volatility: 29.27%
• Delta: -0.03 (minimal downside exposure)
• Gamma: 0.18 (sensitive to price swings)
• Leverage: 517% (massive returns if $2 support breaks)
2. WKHS20260116P2.5 (Put, $2.5 Strike)
• Implied Volatility: 280.22% (extreme volatility premium)
• Delta: -0.15 (moderate downside bias)
• Theta: -0.0028 (moderate time decay)
• Leverage: 1.57% (speculative long-dated play)

Both contracts offer asymmetric risk/reward, but note zero turnover indicates illiquidity risks. A 5% downside to $2.54 would see the $2 put gain $0.13 intrinsic value, while the $2.5 put’s payoff becomes $0.46. Beware: These are lottery tickets requiring extreme volatility.

Backtest Workhorse Group Stock Performance
The backtest of WKHS's performance after a -40% intraday plunge shows mixed results. The 3-Day win rate is 44.08%, the 10-Day win rate is 43.05%, and the 30-Day win rate is 43.20%. While the stock experienced a maximum return of 0.07% over 30 days, the overall trend was negative, with a -0.41% return over 3 days and a -0.58% return over 10 days.

Workhorse’s Fate Hinges on Merger Approval—Buckle Up for Volatility
This seismic sell-off is a referendum on Workhorse’s ability to navigate its precarious capital structure. While technicals suggest near-term mean reversion, the stock’s viability depends on finalizing the merger terms and securing Nasdaq compliance. Watch for:
• August 28—Exclusivity period expiration for merger talks
• $2.65 support break—triggers bearish acceleration below 200-day MA
• TSLA’s $350+ performance—sector sentiment barometer

Action Alert: Short-side players should target the $2 strike put for a potential 517% leveraged play, but pair with strict stop-losses above $3. Monitor the merger’s progress daily—this stock is now a high-beta proxy for corporate governance risk.