The QuantumScape (QS) stock price had a tough week after a short-seller published a long 18-page report that questioned the company’s products. The stock ended the week at $35.52, which is more than 73% below its all-time high. Its market cap is at more than $13.3 billion, which is remarkable for a company whose product is yet to be produced.
QuantumScape short report
For starters, QuantumScape is a relatively young company that was started in 2010. The company is building a technology it aims will solve the biggest challenge in the automotive industry: the battery. The firm is developing a solid-state battery that it will sell to other EV makers like Tesla, Volkswagen, and General Motors.
QuantumScape became a publicly-traded company in August 2020 when it merged with a SPAC known as the Kensington Capital Acquisition Company. At its peak, the Volkswagen-backed company was valued at more than $30 billion.
The company expects to start selling its batteries to automakers in the next few years. This means that it does not yet have any revenue but it is spending millions of dollars every month. In the most recent results, the company said that it spent more than $81 million in 2020. $15.5 million went to SG&A expenses while the rest went to Research and Development (R&D).
The QuantumScape stock price dropped sharply last week after a short-seller known as Scorpion Capital raised concerns about the company. In the report, they interviewed some of the company’s former employees and some battery experts. They concluded that the company had exaggerated some of its claims and that it was internally facing some development issues.
QuantumScape to sue Scorpion
The company responded to the short report furiously. Jagdeep Singh, the CEO went live on CNBC where he defended the firm. It also published a long report refuting most of the claims made by the short-seller. Most importantly, during the weekend, CNBC reported that the company was considering suing Scorpion, the author of the report.
The short-seller report was notable for several reasons. First, like many companies, QuantumScape went public through a Special Purpose Acquisition Company (SPAC). These entities have already raised more than $100 billion this year and are being scrutinized for their efficiency.
Second, the report came a few months after a short-seller accused Nikola of exagerrating its claims. Shares of Nikola, a hydrogen car startup, have dropped by more than 90%. It is now valued at more than $4 billion, down from its all-time high of $36 billion+.
Nikola share price performance
Finally, the report came as the company’s lock-up period nears. In most cases, shares of recently public companies tend to slide before and after the lockup period.
Analysts have mixed feelings about QuantumScape. Those at Cowen are bullish, with a target of $57 while those at Morgan Stanley have a target of $70. Bernstein analysts are bearish with their target at $28.
QuantumScape Stock price analysis
Looking at the four-hour chart, we see that the QS stock price has been in a downward trend in the past few weeks. The shares have formed a descending channel that is shown in red. They are also slightly below the 25-day and 15-day moving average (MA) and slightly above the 78.6% Fibonacci retracement level. They are also slightly above the lower side of the channel.
Therefore, in the near term, the stock may have a relief rally that will see it retest the upper side of the channel at $58. However, a break below the lower channel will see it keep falling.
