what happened
shares of quantum landscape (QS 4.25%) has shown a brutal 76% decline in 2022, peaking in the first week of trading and falling steadily during a volatile year, falling 86% since mid-November 2021. according to To data offered To S&P Global Market Intelligence. However, QuantumScape’s stock price decline actually started a year ago. In early December 2020, just weeks after going public through a merger of special purpose acquisition companies, its stock price fell 97%, a portfolio-destroying move.
Needless to say, the past few years have been tough for the company’s investors as it works to develop and commercialize solid-state battery technology.
So what
The excitement around QuantumScape’s technology makes sense. The company says its solid-state technology will revolutionize the performance and cost of electric vehicles (EVs), giving him over 300 miles of range for less than $30,000 and a car that charges in less than 15 minutes. To do. They are also lighter and potentially safer than current liquid and gel lithium-ion batteries.
catch? The technology has yet to move beyond the lab and into the manufacturing plant, potentially disrupting current EV battery companies. The company has just begun the early stages of test manufacturing, and full commercialization is still several years away. Over the past few years, this has become more apparent to the wider investment community, the early excitement has faded and stock prices have rebounded.
The problem is that management is consistent in setting expectations. The company has never over-promised a shortcut to commercial success. Investors simply set their expectations too high.
So
QuantumScape must continue working towards commercialization. This is more than just building factories and manufacturing batteries. The company is still working to demonstrate that it can create this new technology at both a scale and cost competitive with current technology. And just as important as cost, the company must prove that its batteries are both reliable and safe. On paper, solid-state tech should make the battery last longer. The company expects his 240,000-mile usable life in the first generation. It is also lightweight and safe. He has to prove it through significant real-world testing with his automaker partners, and has only recently started sending prototypes to his OEMs. A few more years until commercialization.
Most importantly, you have to do everything in a very different capital environment than when you went public. Rising interest rates and a crash in stock prices made additional financing more costly, consuming $300 million in working capital in the first nine months of the fiscal year. We currently have cash equivalents of $1.1 billion, but will need to raise more at some point. Investors should want it to be building a factory, not to cover operating costs, but short on cash, but not yet ready to commercialize.
Can QuantumScape finally surpass its previous all-time high? Yes. But that is unlikely to continue for many years to come, and frankly, the company may not be a commercial success for investors.
Jason Hall holds a position at QuantumScape. The Motley Fool has no positions in any of the companies mentioned. The Motley Fool’s U.S. headquarters has a disclosure policy.