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Want to know one of the easiest ways to make big returns with investing? Identify the major trends driving the markets, find a well-positioned company within one of those trends, and simply ride the momentum. Today, one of the biggest moneymaking trends is found with the combination of EVs (electric vehicles) and SPACs (Special Purpose Acquisition Companies). Our trend and technology expert, Matt McCall, has been covering this opportunity since the beginning. In today’s essay from Matt, he brings us a slight twist on EVs and SPACs. It involves the batteries powering EVs. And the company behind this just so happens to have the backing of Bill Gates. What’s so special about it? Well, I’ll let Matt dive into those details. But if EVs and batteries haven’t been on your radar, it’s time to start looking. As Matt notes:
Have a good weekend, Jeff Remsburg |
This Bill Gates-Backed Company Is Making Big Waves in the Battery World
By Matt McCall
Nikola’s (NKLA) absolutely crazy trading really brought this 2020 trend into the spotlight in June.
That’s when the manufacturer of electric vehicles (EVs) and hydrogen-powered trucks went public via a merger with a SPAC — or special purpose acquisition corporation. The stock was up a crazy 900% after the announcement in only one week.
Just like that, the relationship between EVs and SPACs was sealed. And so was born what has become one of the hottest trends of the year.
It’s a powerful combination — the future of transportation and the future of going public.
Since Nikola’s market debut this summer, at least 10 more EV-related companies have gone public via SPACs or announced the intention to merge. There have been more EV manufacturers, battery companies, and even a mining business. And there are plenty more to come …
One in particular is especially interesting. It’s a battery company that’s been around for only a decade, and in that time it’s won the backing of not just Volkswagen (VWAGY) and several other related businesses, but also one of the greatest minds of our time ….
The company is QuantumScape, which develops and supplies solid state batteries for electric vehicles. One of its early backers was none other than Bill Gates, the founder of Microsoft (MSFT) and one of the richest men in the world.
When Bill Gates gets involved with a company, it’s worth paying attention.
QuantumScape announced on September 3 that it would merge with and go public via a SPAC called Kensington Capital Acquisition Corp. (KCAC). The implied value of the new company is $3.3 billion, as QuantumScape is expected to receive more than $1 billion in cash and funding commitments as part of the deal.
The acquisition will close here in the fourth quarter, at which point the newly combined company will list on the New York Stock Exchange under the ticker “QS.”
Given the already huge hype that’s followed this industry in recent months, it’s no surprise that Kensington Capital shot up more than 157% to peak above $25 on September 4. It has since come back to the $15 area.
Kensington had been in search of a battery supplier to merge with. But this decision wasn’t about capitalizing on the industry’s current momentum, which I like. It was about identifying long-term potential. CEO Justin Mirro was an automotive engineer for General Motors (GM) and Toyota Motor (TM) before he became an investment banker, so he knew what he was looking for.
“While there’s a lot of other SPACs out there to claim they’re automotive experts maybe for the last 30 days, we’ve been automotive experts for the last 30 years,” Mirro said.
Kensington isn’t the only business with a keen eye on QuantumScape’s future potential. It has more than $800 million in committed funds from the likes of Volkswagen, Continental Tire, Science Applications International (SAIC), and Bill Gates. And current board members include the chief technical officer of Tesla (TSLA) and the head of Volkswagen’s Battery Cell unit.
Volkswagen is QuantumScape’s largest shareholder. They’ve been in business together since 2012, and in 2018 the two formed a joint venture to prepare for the mass production of solid state batteries. Volkswagen’s goal is to launch 70 EV models and produce 22 million units by 2029 — and QuantumScape’s technology can help it get there.
QuantumScape and its high-profile backers are worth knowing about because the story confirms the massive long-term potential in solid state batteries. Longtime MoneyWire readers know that this is a hypergrowth trend I’ve followed for some time.
I even put together a Solid State Battery Portfolio for my Investment Opportunities subscribers that’s up nearly 100% since I introduced it in January 2019.
The battery trend goes back to EVs and the future of transportation — what I call Transportation 2.0. And the best news? It’s still in its very early stages.
Through July, EVs accounted for just 3% of 2020 global vehicle sales. And of that number, two-thirds were pure EVs — the rest were hybrids. So about 2% of all vehicles sold this year are pure EVs. You don’t have to be a math genius to see the huge potential.
The good news is that growth is already underway. Total EVs sold in July hit 248,000 — the fourth best month on record and 79% higher than last year.
Over the next five years, automakers plan to debut 200 new EV models. And by 2025, UBS predicts that one in six cars sold around the world will be electric. That would be 5X growth in five years!
But we can’t just snap our fingers and magically get these cars on the road. We need the infrastructure and the technologies to make them run properly. And that’s where the next-generation battery technology that companies like QuantumScape are working on come into play.
Without better battery technology, it will be difficult — if not impossible — for EVs to replace gas-powered vehicles. And solid state batteries look to be the big winner in this space.
Step by step, solid state batteries are pushing transportation into the future …
With so much at stake, here’s my prediction:
Investors who get in on this breakthrough now — before it’s rolled out on a mass scale — have the opportunity to be a part of what could be one of the single largest creators of wealth of the last 25 years.
This isn’t something that might or might not happen. This IS happening, and the time to get in is now.
Best regards,
Matt McCall
Editor, MoneyWire
