QuantumScape Still Has a Long Road Ahead of It

Stock Market

Investors should know that some of the shine has worn off of QuantumScape (NYSE:QS). In fact, a lot of the shine has worn off of QS stock. 

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The markets are a bit wiser to the reality of the EV revolution. That will ultimately serve investors better in the long run. By now, everyone with a finger on the pulse of the markets is aware that EV mania has cooled. 

QuantumScape shares cooled as a part of this general sell off. I believe this is a good thing, because potential investors will now be compelled to conduct more due diligence before investing in anything EV related.  I say that, because the reality is that QuantumScape is not yet commercially viable. 

As a result, capital that flows into QuantumScape now will be more willing to buy as a buy-and-hold proposition. Any capital that flows in now will be betting that QuantumScape’s detractors are wrong. 

QS Stock: Short Seller Allegations

Before jumping into the allegations levied against QuantumScape by Scorpion Capital, I want to note something. QuantumScape has been claiming to be revolutionary since its IPO back in August of 2020. Any time a company claims to have a breakthrough technology at the most opportune time, as QuantumScape did during the EV boom, investors should be extra skeptical. 

The other thing to note is that short sellers can say whatever they want and that they have incentive to do so by establishing a short position. Basically, Scorpion Capital claims in its 188 page report that QuantumScape misled investors. QuantumScape responded to the allegations by stating that it stands behind its data. 

This boils down to a back of forth that amounts to ‘he said, she said’.  Anyone can read through the report here and make their own determination as to who to believe. I’ll leave that up to those people. What I’d like to note here is that if QS stock is indeed a “pump and dump SPAC scam,” markets disagree.

The simple truth is that roughly a week after the report dropped QS stock has already retraced the losses from it. 

Back Up

What is clear in the aftermath of all of this is that markets simply got ahead of themselves in regard to QuantumScape. Because even at the height of the mania that surrounded QS stock, it was clear that the company’s solid-state batteries weren’t going onto roads anytime soon. 

According to a Dec. 8 Wired article, Volkswagen planned “to start using the solid-state cells in some of its own EVs as soon as 2025.” However, markets reacted as if QS cracked the code to the long standing technical bottleneck. 

QS stock had already gained traction by that point, but it really shot up, more than doubling in the 2 weeks after that article was published. I’m not implying that Wired is to blame by calling the title ‘provocative’, but rather that the onus is on the reader – and investor – to really think about what’s being said. 

Growth stocks are simply marketed in this way and hype can trump rational thought in hot markets. QuantumScape’s solid state batteries won’t be on the road until 2025 at the earliest. Investors have known this since very early in the game. 

Headlines that now indicate that QS stock will tank should be treated with a similar degree of skepticism. It’s still early in the game.

QuantumScape may truly solve the problem yet. But when claims flow out that it has, comb through those claims carefully. The race to a commercially viable solid state battery doesn’t have any clear winner yet.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”