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QuantumScape Falls on Scorpion Capital Short Report

QuantumScape is 'no different than other recently exposed SPAC promotions and EV frauds,' charges a report from Scorpion Capital.
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QuantumScape  (QS) - Get QuantumScape Corporation Class A Report tumbled Thursday after activist short-seller Scorpion Capital called the electric vehicle battery maker a "pump and dump SPAC" scam.

Shares of the San Jose company finished down 12.24% to $35.85. The company said that it "stands by its data."

The scathing report from Scorpion was titled "QuantumScape: A Pump and Dump SPAC Scam By Silicon Valley Celebrities, That Makes Theranos Look Like Amateurs." It referred to the healthcare company that was shutdown in 2018 amid charges of fraud.

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"We conducted 15 in-depth research interviews, including 9 former R&D employees, 4 leading solid-state battery experts, and 2 employees in Volkswagen’s EV battery effort," the report said. "Our research leads us to conclude that the company is no different than other recently exposed SPAC promotions and EV frauds."

Scorpion's report said that Volkswagen employees indicate that engineers and battery experts internally are highly skeptical of QuantumScape’s claims, getting “nice Powerpoint slides” and little else.

"QS stands by its data, which speaks for itself," the company said in a statement. "We have provided higher transparency than any other solid-state battery effort we are aware of, with details on current density, temp, cycle life, cathode thickness, depth of discharge, cell area, pressure."

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QuantumScape added that "this follows a typical pattern: short a stock, follow with a negative 'report,' make money on their short position, and quickly cover to lock in their gains."

Earlier this month, QuantumScape said it met conditions for Volkswagen to invest another $100 million in the company.

"QuantumScape recently went public through the backdoor mechanism of a SPAC," the Scorpion report said. "The company claims to have a 'magic material' that’s led to a breakthrough solid-state battery for electric vehicles."

Last month, the company began a public offering of 13 million Class A common shares.

QuantumScape went public last September by merging with the special purpose acquisition company Kensington Capital Acquisition.

The report added that "even amidst the current mania of retail gambling on vaporous SPAC promotions, QS stands out for its reckless, nosebleed valuation of $15B - or roughly ~$80MM per employee, a mere 188 per LinkedIn."

In February, the company revealed a new breakthrough in its battery technology, while billionaire George Soros’s investment firm disclosed that it has taken a stake in the startup.

According to its website, Scorpion Capital "specializes in intensive, differentiated research which uncovers what investors have missed and Wall Street is paid to ignore."