For the umpteenth announcement of 2020 by a special purpose acquisition company, or SPAC, as they’re more commonly known, Kensington Capital Acquisition Corp. (NYSE:KCAC) declared Sept. 3 that it was merging with QuantumScape, a San Jose-based developer of a next-generation solid-state lithium-metal battery.
Kensington Acquisition only went public in June, selling 20 million units for gross proceeds of $200 million. Like all SPACs, it then had a fixed amount of time to find a merger partner. In Kensington’s case, it was 24 months.
Instead, it announced an arrangement within three months of its IPO. Something tells me that Justin Mirro and the rest of the sponsors of the SPAC already had an agreement in hand before listing its shares.
Now that a deal has been reached, I can’t help but root for Kensington Capital and its successor company, QuantumScape, which is expected to continue trading on the New York Stock Exchange under the QS stock symbol.
Here’s why I feel this way.
Kensington Capital Stock Is Supporting Innovation
I’m sure a lot of investors who’ve bought KCAC stock since the Sept. 3 announcement have done so because of Bill Gates’ and Volkswagen’s (OTCMKTS:VWAGY) involvement in the innovative startup.
I’ll get into why it makes perfect sense to bet on QuantumScape based on their involvement in a minute, but first, I want to tell you why I would invest in the company.
One word comes to mind: Innovation.
Just reading Fast Company’s article about QuantumScape’s world-changing idea, I can’t help but get goosebumps thinking about the possibilities of its state-of-the-art battery.
QuantumScape Chief Executive Officer and founder Jagdeep Singh founded the company in 2010 after realizing his Tesla Roadster had a less than ideal battery powering the vehicle.
“It had a limited range. It took a long time to charge. It was very small, because the battery couldn’t take a lot of load. The battery was a huge portion of the cost of the vehicle, which is why it was a really expensive car. I realized that if you could make a better battery, you could really change the world,” Singh told Fast Company.
Who doesn’t want to change the world? Why else are we put on earth but to make the biggest contribution possible given our particular talents?
Innovators such as Elon Musk don’t come around all that often, so the fact Singh and his team are looking to create battery technology that is both efficient and inexpensive is mind-blowing.
Volkswagen revealed its 2021 ID.4 sport-utility vehicle Sept. 23. The battery-electric all-wheel-drive SUV will have a range of slightly more than 240 miles, an acceleration of 0-60 miles per hour of 5.8 seconds, and capable of towing 2,700 pounds.
My wife and I are getting ready to buy a replacement vehicle for our current Jeep Cherokee, and while we don’t have any problems with it, we both would like to go fully electric if possible. On that front, Fiat Chrysler (NYSE:FCAV) is woefully behind its competitors, including Volkswagen.
We sometimes like to drive to Prince Edward Island to visit the family from our home in Halifax. That’s approximately 195 miles door to door. In the wintertime or any time we don’t go point-to-point, 240 miles isn’t going to cut it.
That’s as good a reason as any for Volkswagen and Bill Gates to back QuantumScape.
The Future Possibilities
The automotive industry has realized that electric vehicles are the future (some more than others), making QuantumScape’s opportunity that much more enticing.
“The improvement you’re seeing in range is not coming from fundamental improvements in battery technology,” Singh says. “What’s happening is people are [installing] bigger and bigger [battery] packs.”
Singh tells Fast Company to be truly competitive with internal combustion engines (ICE), electric vehicles will have to match ICE vehicles on every metric.
“Those metrics include not only cost but range, charge time, safety, the life of the car. And that’s exactly why we’re doing what we’re doing with the solid-state batteries. We believe this also allows car companies to make electric cars that are much closer to combustion engine rivals than traditional batteries do.”
“So we think that kind of breakthrough is exactly what’s required for people to start replacing their combustion cars with EVs the next time they’re out in the market to buy a car.”
The man is speaking my language. I haven’t been this excited about a technological innovation since Elon Musk started mass producing Teslas.
Forget multiples, QuantumScape could be a game-changer. Need I say more?
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
