Workhorse’s Nikola-Like Investment Undervalued, Hedge Fund Says

(Bloomberg) — Electric-vehicle maker Workhorse Group Inc. is undervalued, especially when considering its investment in a peer that could one day rival Nikola Corp., according to a hedge fund that recently established a position in the shares.

The stock of the Ohio-based company, which designs and builds electric vehicles and aircraft, trades at “a significant discount to our estimate of its intrinsic value,” Formidable Asset Management LLC said in a research note.

The stock is undervalued “despite its presence in this attractive niche, valuable intellectual property, and potentially transformative strategic partnerships,” Formidable’s Chief Executive Officer Will Brown and Chief Investment Officer Adam Eagleston wrote.

The company’s “key stamp of approval” is its client roster, which includes companies like United Parcel Service Inc., DHL Worldwide Express, FedEx Corp. and Ryder System Inc., according to the note.

Formidable added that Workhorse’s investment in electric pickup-truck maker Lordstown Motors Corp. is the “kicker.” The 10% stake could be worth over $1 billion even if the market views Lordstown as only half as valuable as Nikola, the fund said.

Nikola, which designs and manufactures battery-electric and hydrogen-electric vehicles, has nearly doubled since debuting on the Nasdaq June 4 via a reverse merger. Workhorse’s shares have gained 50% over the same period.

The research note highlights that Nikola is taking orders for an electric pickup truck, which won’t be delivered until 2022, after the anticipated release of Lordstown’s truck.

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