If you thought you had a bad February, maybe you should call up the execs over at Workhorse (NASDAQ:WKHS), who saw WKHS stock lose more than 50% of its value last month.

What happened?

Well, the electric delivery van maker seemed to be in a great position to win the multi-billion-dollar USPS next-gen delivery vehicle contract, considering Workhorse was the only finalist for the contract with a U.S.-made electric delivery van, at a time when Washington D.C. was pushing hard for both American-made products and “green” solutions.

But Workhorse actually lost the contract to a company — Oshkosh (NYSE:OSK) — that will make gas-powered vans for the USPS.

Talk about a twist…

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Now, some folks think that this wild story will have another few twists down the road, and that eventually, Workhorse will win the USPS contract.

That may happen as there are some political red flags in here after all.

But I wouldn’t count on it. Here’s why I’d stay on the sidelines when it comes to WKHS stock:

WKHS Stock: Some Political Red Flags

Workhorse losing the USPS contract was an absolute shocker. After all, you don’t see what you saw in Workhorse’s stock — a 50% haircut in a day — unless Wall Street receives absolutely shocking news. Workhorse losing the entire USPS contract to Oshkosh was just that.

You have to remember, the USPS is a U.S. government agency. So when, in December and January, U.S. President Joe Biden and multiple members of his team talked up a big game about electrifying all U.S. government vehicles and doing so with American-made vans, pretty much everyone thought they were telegraphing the USPS contract. Workhorse was the only finalist for the contract with both an American-made van and a fully electric van. Of course, Workhorse was going to win all or at least some of that contract.

But they won none of it. Not a single van order.

Why?

Some folks think its politically charged. There are really two theories at-play here. One, the postmaster general — Louis DeJoy — is a legacy Donald Trump holdover, and therefore, awarded the contract to Oshkosh to win good favor with the folks in Wisconsin (which is a critical swing state). Or, two, Workhorse was a Trump-favorite EV company, and therefore, Biden and company somehow convinced the USPS to not give the contract to Workhorse.

Are either possible? Sure. Probable? No. But there is talk in Washington D.C. of looking into this USPS decision more closely and potentially even outright giving USPS more funds to just buy electric vehicles (one of the stated reasons for the USPS not going all-electric was costs).

So, the Workhorse-USPS saga isn’t over just yet. And there is a chance that Workhorse ends up winning some order flow with the USPS. But, when it comes to Workhorse, I wouldn’t bet on these chances anytime soon.

Not the First Big Customer Departure

Politics may have played a part in Workhorse losing the USPS contract. Costs definitely did. But so did technology and manufacturing capability — and that’s bearish for Workhorse.

You have to understand the context here.

USPS isn’t the first big potential customer to walk away from Workhorse. UPS and Workhorse briefly worked together in 2017 and 2018. During those two years, UPS talked often about Workhorse in its annual Sustainability Reports. More importantly, in the first quarter of 2018, Workhorse delivered 50 vans to UPS.

But, suddenly in the 2019 Sustainability Report, UPS eliminated all mentions of collaborating with Workhorse. Months later, UPS made a huge equity investment into Workhorse’s rival, Arrival, and is going all-in with ordering pretty much all of their electric delivery vans from Arrival.

When the smoke cleared, it was obvious UPS had walked away from Workhorse.

Shame on Me

You know the old saying? Fool me once. Shame on you. Fool me twice. Shame on me.

Well, that is what’s going on here. As investors, we can easily write off UPS walking away from Workhorse for a variety of reasons. But, when you layer on the fact that USPS also walked from Workhorse in 2021 — and not in favor of another electric delivery van maker, but rather, in favor of a gas-powered van maker — then the reality here becomes pretty hard to refute.

If Workhorse had great EV technology and clear visibility to scaling manufacturing capacity, both UPS and USPS would’ve partnered with them — or, at the very least, one of them would have done so.

Instead, neither did. And when you couple that with all the short reports out there talking about Workhorse-related accidents and manufacturing shortages, the picture becomes clear.

Workhorse’s EV technology presently isn’t all that great, and their manufacturing abilities are greatly constrained. Those are big problems. Until they get fixed, Workhorse’s stock will remain unnecessarily risky.

Bottom Line on Workhorse Stock

At one point in time, I was bullish on WKHS, because I believed the company was going to win the USPS contract and leverage that contract to attract talent to fine-tune its EV technology and raise capital to rapidly expand its manufacturing capability.

But I don’t see it anymore.

Now that both UPS and USPS have walked away from Workhorse, it looks unlikely that the company will attract much talent to help improve its EV technology, and/or that the company will be able to raise much capital at favorable terms to expand manufacturing capacity.

The company is operating with both hands tied behind its back. That’s not a great situation. And so, despite the huge meltdown in WKHS stock, I think it’s still best to remain on the sidelines.

But there is opportunity elsewhere in this tech sector selloff…