What potential dilution or change in ownership structure will result for current WKHS shareholders and how could that impact valuation?

Dilution & ownership shift

The merger terms give Workhorse (WKHS) shareholders only ≈ 26.5 % of the post‑merger entity. In other words, the 100 % of WKHS that current investors control today will be reduced to a minority slice of a larger, combined company, while the balance (~73.5 %) will be owned by Motiv Electric Trucks’ shareholders. This is a classic dilution of both voting power and economic interest – each existing WKHS share will be converted into a smaller proportion of a bigger capital base.

Valuation implications

1. Immediate earnings‑per‑share (EPS) compression – because the same amount of WKHS earnings will now be spread across a larger share pool, the “pure‑play” valuation multiples (e.g., EV/EBITDA, P/E) will look more expensive for the former WKHS equity. Markets typically price this by applying a discount to the pre‑merger valuation, often in the 10‑20 % range, depending on perceived synergies.

2. Potential upside from combined‑company fundamentals – if the merger unlocks cost synergies, expands the EV‑truck pipeline, or adds a stronger balance sheet, the new entity could command a higher enterprise‑value multiple than WKHS alone. In that scenario the dilution is offset by a larger growth denominator, and the share price may recover or even exceed pre‑merger levels over the medium‑term.

3. Technical view – the conversion ratio creates a clear ceiling for the post‑merger price (≈ 26.5 % of the combined market cap). In the short‑run we can expect a downward pressure as the market digests the loss of control and the dilution of cash‑flow claims. Look for the stock to test the recent low‑range (around $0.70‑$0.80) with the 20‑day SMA and the 50‑day SMA as near‑term support. If the combined entity’s fundamentals start to look credible (e.g., a credible pipeline, better cash‑burn profile), the price could find a new higher baseline around the 26.5 % ownership‑valuation level.

Actionable take‑away

• Short‑term: Anticipate a modest pull‑back (≈ 10‑15 % downside) as investors price the dilution and reduced voting stake. Tight‑range traders may look for a bounce off the 20‑day SMA for a quick scalp.
• Medium‑to‑long term: Keep a long‑biased stance if you believe the merger will materially improve the balance sheet, production capacity, or market reach of the combined EV‑truck platform. A break‑above the current resistance (≈ $0.90) with volume could signal that the market is pricing in those synergies, making a re‑entry point for a position with a 6‑12 month horizon.