I’ll admit to falling for the solid-state story behind QuantumScape (NYSE:QS). The company was building a better mousetrap and I was here for it. It still may be, and I may get excited about the technology again. But for right now, the chart for QS stock is giving indications that its floor may soon become its ceiling.
There are many reasons for this. One is that the air has gone out of the electric vehicle (EV) bubble. The recently announced Biden administration infrastructure plan may blow some air back into the sector. But, for now, investors are trading their rose-colored glasses for green eyeshades. And the question for QS stock is where is the revenue? It’s about four years away.
And in the meantime, the company continues to dilute its stock. QuantumScape recently received a $100 million “bonus” from Volkswagen for meeting performance metrics. However the company says it will use a portion of that money to issue an additional 15.2 million shares.
It’s also becoming apparent that QuantumScape may not be first to market with a solid state battery. Toyota (NYSE:TM) plans to have a running prototype for a solid-state battery this year. And the company plans to deliver production vehicles with solid-state batteries by 2025.
In fairness, there may be room for more than one player in this space. And as these things go, getting there first doesn’t always mean being the best.
And Then There Are the Lawsuits
By now any investor in QuantumScape is familiar with the Seeking Alpha article that has single handedly torpedoed QS stock. The article claims that the company is understating the difficulty of bringing a solid-state battery to market.
This article has led to at least three separate class-action lawsuits. Each one is essentially using the Seeking Alpha article as support that the company has made misleading statements that have materially affected shareholders.
Imitation (and Theft) Is the Sincerest Form of Flattery
But one lawsuit that fell off the radar was a lawsuit that Fisker (NYSE:FSR) settled with QuantumScape. In that lawsuit, a former QuantumScape employee admitted to remotely accessing confidential material and sharing it with Fisker both before and after taking a job with the EV startup.
Before I simply dismiss this as an open-and-shut case, I have to admit that it puzzles me that QuantumScape may not have even noticed the theft if it wasn’t for the former employee in question accidentally referencing a QuantumScape item number on a call with a third-party supplier.
Fisker contends it never used any of QuantumScape’s non-public information. But the fact remains they’ve had a sneak peek and that’s enough reason for shareholders to be concerned.
The Company Has a High-Profile Cheerleader
Recently, Bill Gates who has a large position in QuantumScape took to the interview circuit to tout his investments in climate change solutions. The topic veered off into the risk factors associated with special purpose acquisition companies. And while Gates never overtly touted QuantumScape’s solid-state technology, he made it clear that he only intends to be associated with high-quality companies.
Fair enough. And Will Ashworth commented rightly that Bill Gates hasn’t made his fortune by being wrong that often. But I still find the timing at least somewhat interesting. However, the stock has dropped about 20% since that interview so maybe investors are parting company with Gates on this one.
The Bottom Line on QS Stock Hasn’t Changed
I’ve written two prior articles about QuantumScape (one before the merger was complete and one after). In both articles, I was careful to remind investors that the company will not have a product in market until 2025.
In the meantime, there is a lot of news and noise surrounding the company. And that is having a negative impact on the stock. That noise is reason enough to manage your expectations, and your position, in QS stock.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.