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A Short-Seller Attack on QuantumScape Reveals a Forlorn New Reality for Exotic Batteries themobilist.medium.com
As great as they might be, the best may not be good enough to dislodge trusted lithium-ion
QuantumScape, the sizzling darling of battery investors from Silicon Valley to Wall Street, Europe and beyond, is the object of a fierce short-selling attack. Its assailant is Scorpion Capital, a little-known guerrilla outfit that yesterday released a 188-page, scorched-earth indictment that, in bold, black-and-red font and yellow highlight pen, accused QuantumScape of fraud and other transgressions. QuantumScape’s share price plunged 12.2% by the close of trading. The report is a relentless, repetitive, often reckless assault that detracts from numerous valid doubts about QuantumScape: As of now, the startup hasn’t produced an actual battery, but only a cell half the size, in ampere-hours, of an Apple Watch. QuantumScape makes much of its supposedly liberal release of data, but many of its battery peers think it’s actually been pretty miserly, and that the data it has released has led to just more questions. Scorpion made a particularly incendiary accusation: that QuantumScape’s management, while allegedly hiding all these problems, intends to “pump and dump” the stock — to unload their shares after their “lockup” period, the usual time in which employees must wait before selling any stock. In fact, the 150-day lockup period for QuantumScape employees does appear to lift right around the last week of this month, according to its S4 filing with the Securities and Exchange Commission. If that is correct, QuantumScape employees and executives could then sell shares as long as the stock price is at least $12 for any subsequent 20 days within a 30-trading-day period (since they went on sale, QuantumScape shares have never sold for less than $35.85, the price yesterday). Senior executives could sell 25% of their shares. But there is more to this period for QuantumScape and a dozen or so high-flying battery startups, all promising exotic successors to lithium-ion, the workhorse formulation in every electric vehicle, smart phone, laptop and nearly every other portable electronic device: Some or even most these startups may end up failing — they may simply not manage to make the jump from the lab to the gargantuan scale required to make money in batteries. Yet, if some do collapse, it may not matter all that much, battery experts tell me. This is because lithium-ion itself has come so far, and appears to have much further to go. Lithium-ion’s cost and performance appear headed to a mid-decade inflection point that would profoundly curtail the advantage of moving to one of the long-sought battery breakthroughs. That is, for decades battery researchers have aspired to invent a pure lithium-metal battery — what QuantumScape is working on — and obtain 50% or even more energy than conventional cells. But Dan Steingart, a materials science professor at Columbia University, told me that by the middle of the decade, the performance edge from lithium-metal may only be in the low double-digit percentages. By then, the average cost of lithium-ion batteries is projected to drop to around $100 per kilowatt-hour, the break-even point with conventional gasoline-driven power trains, and to keep dropping from there. Electric vehicles will then cost the same as internal combustion. “If QuantumScape fails, it won’t matter a bit because lithium-ion batteries will already have done most of what they need to for EVs,” Steingart said. “There are pathways to get to $50 to $60 a kilowatt hour. When that happens, that will be all that matters.” “Lithium-ion and advanced lithium-ion have already won the race and are here to stay,” Tyler Lancaster, a principal with Energize Ventures in Chicago, told me in a video call yesterday. The attack on QuantumScape is in a way unsurprising: For a decade, QuantumScape and its CEO, Jagdeep Singh, were among the most secretive battery startups anywhere. But, since emerging from stealth and going public in November as part of the Spac mania, the company has gradually transformed into a comparative chatterbox: Singh has appeared on CNBC regularly, explaining how QuantumScape’s material will be in a commercial VW by 2024, and was the subject of a big spread in Bloomberg just this week. He has been the subject of numerous stories here at The Mobilist, including this one in September, by far the most popular battery piece produced by Medium the last seven months, beating out even Tesla. Which is to say that QuantumScape has been the “it” battery company, a stature reflected in its shares, which soared as high as $131 last December, 13 times their initial price. The San Jose, California company has been bound to attract the attention of short sellers, especially since it doesn’t actually earn any revenue, and won’t until at least the middle of the decade, when it expects its battery system to be deployed in a VW. The Scorpion assault is way over the top, throwing around references to Theranos, the blood test device fraud, and other scams like so much salt and pepper. Battery experts have been scathing: “I call bullshit on this report,” tweeted Jordi Sastre, a Swiss Ph.D student studying solid-state batteries. “I went through the slide deck and found nothing that hadn’t already been openly discussed in the battery community or communicated by [QuantumScape] itself. I’m specially disgusted by the shady analysis by a supposed expert and the amount of misrepresentations.” “I couldn’t find a single statement that hasn’t already been raised and isn’t obvious,” Sam Jaffe, head of Cairn Research, a battery research firm, told me. “It’s all regurgitation. I read the Hindenburg report on Nikola. It was devastating. It showed all kinds of data, photographs and clear evidence that things were not right. There’s nothing like that in this report.” QuantumScape itself responded with an 11-tweet thread just after the market close. It said in part that it “stands by its data, which speaks for itself. 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.” VW, QuantumScape’s lead investor, declined to comment. One might ask, as I have numerous times, why QuantumScape doesn’t simply put all the doubts to rest by paying for an independent, third-party validation of its system. So far, Singh has refused.
QuatumScape is mentioned a couple times in the article.
There are five metrics on which a battery is judged:
how much energy it packs,
how fast it charges,
how many charge-discharge cycles it lasts,
how safe it is, and
how much it costs.
Factorial’s current batteries reach energy density of 350 watt-hours per kilogram and 770 watt-hours per liter. The company’s aim is to reach 400 Wh/kg and 1,000 Wh/l.. But not much better than existing L-ion technology
Factorial’s battery can do up to 460 charge-discharge cycles before its capacity falls below 80%. That’s more than what Solid Power promises with 250 cycles, but less than QuantumScape at 800 cycles.
It looks like QuantumScape, has the a very big war chest with $1.5 billion compared to the other ASSB startups.
Factorial started internally testing batteries with 40 amp-hours of capacity, about 10 times the size of a smartphone battery. That’s double the 20 Ah battery that Solid Power has built and many times the size of the largest battery QuantumScape has disclosed. (The size of a QuantumScape’s disclosed battery does not bother me too much since the industry is very secretive about their research. CARKEY)
solid-state battery partnerships:
Toyota Corp. is working with Panasonic,
Volkswagen AG with QuantumScape,
General Motors Co. with Solid Energy Systems,
Ford Motor Co. with Solid Power and
Mercedes Benz AG with Hydro Quebec
Solid-state batteries are set to see rapid increase in demand after 2030, eventually outpacing current lithium-ion batteries
Hello and thanks for starting the board. I'm new to QS, impressed with some of the videos and discussion, bought some shares.
One thing puzzles me: the QS video seems to show that the cell size changes as the anode forms while charging . That would seem to me to create problems for layering multiple cells.
Maybe it's shown that way for emphasis on their clever anode approach...or maybe the cell gets fully charged before any layering in the manufacturing process, and doesn't change at all once that occurs...
Also wondering if anyone knows the specifics of the next major milestone that will control the next tranche from VW?
Why the Hype Around Battery Startup QuantumScape Is Discharging
The former stock-market darling still has a market value of $10 billion, which is a lot to take on little but hope and trust
By Stephen Wilmot Heard On The Street Wall Street Journal Updated Aug. 25, 2021 12:45 pm ET
QuantumScape’s battery research has produced some promising test results, but details of its technology have been limited. PHOTO: NICHOLAS ALBRECHT FOR THE WALL STREET JOURNAL -----------------------------------
As a black-box company in a technical industry, battery startup QuantumScapeQS -0.23% was always an unlikely investor darling. Chances that it can revive the early hype around its early-stage technology seem slim.
The company, which went public last fall via a special-purpose acquisition company, says it has hit on a wonder material that could, based on initial testing, enable the manufacture of “solid state” batteries with pure lithium anodes. This would be a breakthrough innovation, extending battery range, supporting fast charging and reducing costs. Electric vehicles might finally be as cheap and easy to fill with power as today’s gas ones.
QuantumScape became a stock-market sensation, with a strong following among individual investors. Valued at $3.3 billion in the deal that brought it to market, the company reached a peak enterprise value of more than $30 billion as 2021 dawned, according to FactSet (more, factoring in stock options and other forms of share issuance).
A steadily falling share price has since brought that number back to about $7.3 billion. Even that is out of kilter with peers. Solid Power, another solid-state startup, agreed to merge with a SPAC in June at an enterprise value of $1.2 billion. British peer Ilika is capitalized at less than $300 million.
The difference can only be justified if QuantumScape really has found the holy grail of battery research. This isn’t clear. The company hasn’t disclosed details of the revolutionary ceramic material at the heart of its cell design, making it impossible for scientists to verify. The test results it has published are promising as far as they go, but that isn’t far.
After years of secrecy, the newly public company said in December that the single-layer cells it tested through repeated charges and discharges retained more than 80% of their power even after 800-plus cycles, implying they could be driven hundreds of thousands of miles. It also said they performed at very low temperatures, and could be recharged to 80% of their power in under 15 minutes. These are impressive numbers, but old industry hands cautioned that achieving the same results with multiple layers of electrodes—an essential step toward making batteries big enough to power cars—would be tough.
Since then, the company has focused on increasing the layer count, first to four layers and then 10. A tweet Wednesday showed that its four-layer cells retained their power for 800 cycles under test conditions. The company hasn’t given updates on low-temperature operation or fast charging.
In April, activist short seller Scorpion Capital accused QuantumScape of running a “pump and dump SPAC scam,” which the startup’s chief executive has denied. Even battery experts who give the company’s reports the benefit of the doubt say it faces massive hurdles at the manufacturing stage and that its timeline is wildly ambitious. QuantumScape wants to enter commercial production some time in 2024 or 2025.
Some investors might be comforted by the backing of Volkswagen. In reality, the German automotive giant’s ongoing support may say more about the strategic priorities of Chief Executive Herbert Diess, a big fan of electric vehicles, than about QuantumScape. VW also got in cheap: It paid $300 million in various installments for a 17.7% stake, implying an equity value of $1.7 billion.
Factoring in stock options, QuantumScape’s “diluted” equity value is now $10 billion. It is a lot to take on little but hope and trust.
"Solid-state batteries are set to see rapid increase in demand after 2030, eventually outpacing current lithium-ion batteries"
Maybe... prove you can make one that works better and cheaper than the existing tech (and its improvement over time) before hyping the sales potential ?
I did wander past a QS advert recently... and poked at it briefly...
What I noted was that they were touting their "progress" in making bigger/better packages delivering larger numbers expressed in Amp hours...
But, if you do the math based on the area they provided x the # of layers... really all they were doing was using more of the same material with the same function in a larger package... and calling that improvement?
That's the sort of "improvement" you get if you power your flashlight with four batteries instead or two ?
Would be far more convincing if they published actually meaningful figures of merit rather than irrelevant data when claiming "improvement" in function... ? So, I did go back and look at the language they used... and they were actually careful to NOT claim it as improvement in function... rather than improvement in packaging into a bigger size with "more" in it.. not any "more" coming out of it ?
FWIW... I'm not long QS or any other... and not short QS or any other... rather than having an interest as I used to work on this and related tech in my own lab back in the... late 1990's. So, know the potential... just don't see that there's actually been a lot of progress made recently in advancing toward realizing it... yet.
Worth watching the space to see IF there is progress of that sort made... and then, WHEN there is... maybe useful to sort potential winners and losers...