Workhorse Group Crashes 35% — Is This Merger Deal a Death Sentence or Bargain Alert?

• Workhorse shares collapse 35% intraday to $2.86 after disclosing merger talks that could dilute existing shareholders.
• The Potential Transaction would see a private EV maker merge into Workhorse, with its investors taking a majority stake.
• Technicals show RSI at 97.1 (extreme overbought), Bollinger Bands tightening after a 62% YTD decline.

Today’s dramatic sell-off marks the lowest price since early 2024, with shares hitting a day low of $2.52 before paring losses. The 119% turnover rate signals panic selling as investors digest existential risks tied to the proposed corporate restructuring.

Merger Uncertainty Triggers Investor Exodus
Workhorse’s historic plunge stems directly from its announcement of merger talks with a private EV firm that could fundamentally alter its ownership structure. The deal’s terms—where current Manufacturer investors would hold a majority stake—sparked fears of dilution for existing shareholders. Compounding concerns: the Potential Refinancing’s requirement to cancel warrants and issue new shares without guarantees of closing. Regulatory hurdles, Nasdaq listing requirements, and the 14-day exclusivity window’s ‘fiduciary out’ clause amplify execution risks. Investors are pricing in the probability of this high-stakes deal failing, especially after Workhorse’s 2024 financial struggles and reverse stock split to avoid delisting.

Technical Sell Signal Meets Volatility-Driven Option Picks
• RIS Technicals: RSI 97.1 (extreme overbought), MACD 0.57 vs Signal 0.26 (bullish but narrowing), Bollinger Middle at $1.55 (current price 90% above this).
• Key Levels: Immediate support at $2.52 (day’s low), then $2.00 (52W low). Resistance fades near $3.00 (Potential Transaction’s implied share issuance threshold).

Aggressive traders should focus on short-term options capturing volatility. Top picks:

1. WKHS20251017P2: Put option (strike $2.00) with:
 • 554.46% leverage ratio (extreme sensitivity to price drops)
 • Delta -0.025 (minimal downside exposure)
 • Gamma 0.116 (increasing sensitivity to further declines)
 • Theta -0.0001 (negligible time decay)
Why? Its astronomical leverage ratio makes it a bet on a catastrophic 30%+ drop below $2.00—unlikely but priced for panic.

2. WKHS20251017C3: Call option (strike $3.00) with:
 • 277.23% leverage ratio (strong upside leverage)
 • Delta 0.128 (12.8% directional sensitivity)
 • Gamma 1.307 (sharp gains if price rebounds)
 • Theta -0.0003 (minimal time decay)
Why? A gamble on a technical bounce back to $3.00 amid merger optimism—a ‘hope trade’ for contrarians.

Payoff Scenario: In a 5% drop to $2.72, the $2 put gains $0.28 intrinsic value (max payoff $0.88 if price plummets to $1.12). The $3 call expires worthless, but its gamma ensures explosive gains if the stock rallies 10%+.
Trade Hook: “If $2.50 holds, pivot to WKHS20251017C3. Below $2.00? The P2 option’s 554% leverage becomes a liquidity trap.”

Backtest Workhorse Group Stock Performance
The backtest of WKHS's performance after an intraday plunge of at least -35% shows mixed results. While the stock had a 3-day win rate of 44.08% and a 10-day win rate of 43.05%, the 30-day win rate was slightly lower at 43.20%. However, the average returns over the 3, 10, and 30 days were negative, with a maximum return of only 0.07% over the 30 days, indicating that the stock struggled to recover from the significant intraday drop.

Hold Your Breath — This Deal’s Fate Could Capsize the Stock
Workhorse’s fate hinges on whether the Potential Transaction’s uncertainties outweigh its EV industry synergies. The RSI’s extreme overbought condition suggests a near-term rebound could form a bear trap, while the $2.00 support line is a liquidity cliff. Investors must monitor the 14-day exclusivity window’s expiration and Nasdaq’s scrutiny of the reverse stock split’s compliance. Meanwhile, sector laggard Paccar’s 1.25% dip shows the broader EV space is far less panicked—Workhorse’s pain is unique to its corporate restructuring gamble. Final Alert: Watch for a $1.55 breakdown (Bollinger Middle) to confirm a death spiral—or a $3.50 breakout to signal merger optimism’s return.