(Bloomberg Opinion) – One of the most disturbing developments in business in 2020 has been the trend of electric car companies to list before they get their first revenue. Despite the standard practice of life sciences companies requiring extensive research, launching it to the public before you have a purchasable product is unusual in the automotive world.
However, pre-revenue companies such as Nikola Corp. And Fisker Inc. Billions of dollars in valuations. Now, California battery-powered QuantumScape Corp has taken the electric car craze to a new level.
Founded by Stanford University scientists a decade ago, with financial support from Volkswagen AG, QuantumScape became a public company in November after the merger with Kensington Capital Acquisition Corp., a special purpose acquisition company. The company won’t generate significant revenues until 2026, but it is already estimated at $ 43 billion, or $ 51 billion, on a fully diluted basis. (1)[1)
From a climate perspective, it’s great that investors have committed capital to electric transportation. The promise of such fortunes will encourage others to join the cause of cutting emissions. However, it seems that the same speculative fever that drove Tesla Inc. And NIO Inc. The Chinese have acquired QuantumScape investors.
An average of $ 2.8 billion in battery company shares traded daily for the past week. That’s larger than Alphabet Inc, which has a $ 1.2 trillion market value. Technical factors may have contributed to QuantumScape’s rush: only a small percentage of the shareholder book is available to trade.
First, the good news. In lab tests, QuantumScape’s “solid-state” battery cells have yielded very encouraging results, indicating that the innovative chemistry could someday enable electric vehicles to travel longer distances and charge faster and at a lower cost. (2) This is interesting because it has become difficult to extract significant performance gains from conventional Li-ion batteries. It appears that the team of scientists affiliated to the CEO, Jagdibsing, has achieved a real achievement.[2)هذامثيرلأنهأصبحمنالصعبالقيامبذلكاستخلاصمكاسبكبيرةفيالأداءمنبطارياتالليثيومأيونالتقليديةيبدوأنفريقالعلماءالتابعللرئيسالتنفيذيجاجديبسينغقدحققإنجازًاحقيقيًا
However, when the SPAC deal was announced in September, the parties decided a suitable valuation of $ 3.3 billion. (6) It seemed that the company had fewer than 250 employees and a company that had less than its final product or manufacturer, after strong performance in the stock market, QuantumScape was now more than 10 times that of its initial value, and more from auto manufacturers such as FordMotorCo and battery giants such as PanasonicCorp and Samsung[6)بداهذاوافرًالشركةبهاأقلمن250موظفًاوشركةليسلديهامنتجنهائيأومصنعبعدأداءقويفيسوقالأسهم،أصبحتقيمةQuantumScapeالآنأكثرمن10أضعافتلكالقيمةالأولية،وأكثرمنشركاتصناعةالسياراتمثلFordMotorCoوعمالقةالبطارياتمثلPanasonicCorpوSamsungSDI
Those who bought shares in Kensington SPAC in August enjoyed a return of 1060%, while QuantumScape sold for 80 cents guaranteed it was now worth 50 times. (3) The founder of Stanford University, the three-Sengofretzbrinzotemholme-became billionaire businessmen of Volkswagen, who invested about $ 300 million in QuantumScape, a 23% stake worth nearly $ 10 billion (4)[3)مؤسسوجامعةستانفوردالثلاثة-سينغوفريتزبرينزوتيمهولمي-أصبحوامليارديراتمنالورقستمتلكفولكسفاجن،التياستثمرتحوالي300مليوندولارفيQuantumScape،حصة23٪بقيمة10ملياراتدولارتقريبًا(4)
As is often the case with SPACs, the Kensington sponsor – controlled by Justin Mirro, a former investment banker at Moelis & Company and RBC Capital Markets – was also good. She received stocks and guarantees worth more than $ 900 million, a huge return on her investment of $ 7 million or so, and another return on just a few weeks of work. (5)[5)
Other notable supporters of QuantumScape include venture capital firms Khosla Ventures and Kleiner Perkins, Microsoft Inc founder Bill Gates, billionaire hedge fund George Soros’s Quantum Partners and investor Jeremy Grantham. GB Straubel, former chief technology officer of Tesla, is a member of the board of directors. These endorsements, and years of research and development that have gone into the battery business, indicate that there is more than just noise. The contrast is evident with Nicola, whose proprietary technology (or lack thereof) was the subject of a harsh short sale report, is palpable. (8)[8)
Volkswagen’s production experience should pave the way to commercialization. The partners plan to start production at a small pilot facility in 2024, and then at a much larger plant two years later. But success is not guaranteed.
So far QuantumScape has only produced single-layer cells and it still needs to find a way to stack more than 100 cells on top of one another to create a battery pack. Competitors like contemporary Chinese company Amberex Technology will not sit idly by. CATL’s shares have also risen this year, with an estimated value of $ 110 billion.
One of the advantages of SPAC is that it is allowed to publish detailed, multi-year financial forecasts, while companies that go public via a traditional IPO usually only publish historical finances. Given QuantumScape’s significant production hurdles, it would be unwise for investors to over-rely on these estimates, but whatever happens, they are waiting too long:
Even assuming QuantumScape’s predictions proved accurate, the assessment appears disconnected from reality. The market cap is equivalent to 13 times the revenue the company hopes to generate in 2027. Tesla’s shares are incredibly buttery but a steal compared to just over 13 times the expected revenue in the next 12 months. Volkswagen, which will initially be QuantumScape’s biggest customer, is valued at about 0.3 times sales next year.
QuantumScape batteries may end up pushing the next generation of electric vehicles, but maintaining that rating may be more difficult than the advanced chemistry of batteries.
(1) The 447.5 million fully diluted shares include non-executable stock options, restricted stock units and additional issuable shares for Volkswagen
(2) The general shareholders of SPAC represent only 5% of the shareholder registry. Current QuantumScape shareholders own 82%, and some are neither sellers nor are they subject to closings.
(3) QuantumScape design does not require fabricated anode, keeping costs down. The metallic lithium anode is formed when the cell is charged.
(4) When adjusting for QuantumScape funds
(5) If QuantumScape chooses to recover it, the collateral will be transferred to a maximum of 0.365 shares
(6) Volkswagen has 71 million shares in Quantum Scape but another 15 million will be issued on condition of an outstanding technical achievement, according to S-1.
(7) Kensington sold shares in February 30, and has already signed a non-binding letter of intent with QuantumScape after only three weeks.[7)باعتKensingtonأسهمًافيطرحعامأوليفي30يونيوووقعتبالفعلخطابنواياغيرملزممعQuantumScapeبعدثلاثةأسابيعفقط
(8) QuantumScape also has a lot more patents, for example.
This column does not necessarily reflect the opinion of the editorial staff or Bloomberg LP and their owners.
Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. Previously worked for Financial Times.
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