Solid state electric vehicle battery pioneer QuantumScape reported first quarter results Tuesday afternoon. Investors aren’t sure what to make of it yet. The report included new technical details, which are a positive. The stock initially rose in after hours trading but then sold off.
Shares are down about 4% in after hours trading after starting up about 3%.
QuantumScape (ticker: QS) lost about 20 cents a share from no sales. Wall Street was looking for a 7 cent loss from no sales. The sales figure isn’t a surprise. Analysts doesn’t project any sales until 2024.
QuantumScape is a development stage company working on solid state batteries. Solid state batteries are rechargeable batteries that don’t use a liquid electrolyte–common in today’s battery architecture–to transmit the electric current. The auto industry is high on the potential for solid state batteries because they offer better range, cost, safety and recharge time.
The bottom line loss, like sales, isn’t all that meaningful either. Profits fluctuate based on accounting conventions. Cash spent in the quarter appears to be about $30 million. Cash spent in the fourth quarter amounted to roughly $20 million. QuantumScape ended the first quarter with about $1.5 billion, higher than year end after the company issued new equity in the quarter.
The reason investors should be happy is the company didn’t delay any of its milestones. In fact, there is a new milestone for investors to track. The company plans to have “commercial relevant” prototypes to auto makers in 2022.
What’s more, QuantumScape reported it made multilayer batteries in a larger form factor. The company started out testing one battery which can be though of, essentially, as a playing card. Now the company has tested four larger playing cards stacked together.
Shares rose 3.6% in regular Tuesday trading. The regular trading gain is probably best explained as positioning by traders who have been short shares. QuantumScape stock is down about 64% year to date and more than 75% from its 52-week high of almost $133 a share.
Short sellers borrow stock they do not own and sell it, betting on price declines. After stocks drop they can replace borrowed shares for a lower price and pocket the difference. Short selling is a relatively common practice on Wall Street. The average short interest in an S&P 500 stock is about 2.5% of the shares available for trading.
Short interest–shares sold short compared with those available to trade–in QuantumScape is about 16%, higher than average. Short interest began ramping higher after the stock traded north of $120 at the end of 2020, making the startup one of the most valuable auto parts companies on the planet.
Short sellers were probably also attracted to a negative research report published by a short seller in April. The report questioned the company’s battery performance claims. QuantumScape said it stands by its data.
The short report is one factor in QuantumScape’s recent stock declines. The overall market for more speculative, SPAC-related stocks has deteriorated as well. The Defiance Next Gen SPAC Derived ETF (SPAK) is down more than one-third from its 52-week high.
QuantumScape completed its merger with a special purpose acquisition in November.
QuantumScape management hosts a conference call at 5:00 p.m. Eastern time. Analysts and investors will be eager to hear about battery development against the company’s original timeline.
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