Shares of QuantumScape (NYSE:QS) stock closed higher by about 30% yesterday following an announcement from Volkswagen (OTCMKTS:VWAGY) battery subsidiary PowerCo. PowerCo disclosed that it had conducted tests on QuantumScape’s 24-layer solid-state battery (SSB). The tests revealed that the SSB had successfully completed over 1,000 charging cycles with an energy retention rate over 95%.
QuantumScape’s SSB exceeded the development phase industry standard of 700 charging cycles with a maximum capacity loss of 20%.
“While we have more work to do to bring this technology to market, we are not aware of any other automotive-format lithium-metal battery that has shown such high discharge energy retention over a comparable cycle count under similar conditions,” said QuantumScape CEO Jagdeep Singh.
Is QS Stock Setting Up For a Short Squeeze?
Predicting whether a stock is primed for a short squeeze is no easy task. However, there are some metrics that can provide investors with clues.
As of Dec. 15, there were 54.40 million shares of QS stock sold short with a value of $412.35 million. That’s equivalent to a short interest as a percentage of float of 16.76%. Generally, a short interest above 10% is perceived as high, while a short interest above 20% is perceived as very high.
Another metric to analyze for short squeezes is a stock’s cost to borrow (CTB) fee. QuantumScape’s CTB fee currently tallies in at just 0.43%, per Fintel. The fee rises when short seller demand is high and falls when it is low. The average stock carries a CTB fee between 0.3% and 3%, with QuantumScape’s fee falling on the low end of the average. QuantumScape’s CTB fee has hovered between 0.43% and 0.51% for the past few weeks.
Given the large price increase of QS stock yesterday, we could estimate that short interest has fallen compared to the reading on Dec. 15 due to short sellers covering their positions, or buying shares of the underlying stock.
While QS carried a high short interest as of Dec. 15, its CTB fee is currently low, signaling low demand for short shares. Investors looking for a short squeeze candidate should shift their sights to another stock.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
