Why did QuantumScape stock explode this week

what happened

shares Quantumscape (QS -0.24%) It fell to a 52-week low in mid-June. The electric vehicle (EV) battery maker’s stock has made a notable rebound since then, regaining nearly 50% in value. This week turned out to be particularly strong, with the stock up 17.2% at its highest point as of this writing, according to data provided by S&P Global Market Intelligence.

Ironically, QuantumScape’s recent announcement isn’t really encouraging, but investors are clearly focused elsewhere and seeing promise in stocks.

so what

After releasing its second-quarter numbers on July 29, QuantumScape also submitted a $1 billion bid for mixed securities. Simply put, a company can sell a variety of securities, including common stock, over time to raise that amount of money. Since any issue of common stock will dilute existing shareholders, this is the last thing investors want to see from a startup that is still years away from commercial production.

There is certainly nothing wrong with cashing in on the money, especially for a growing startup company. But things might have been different if QuantumScape had determined that it required money for growth projects. Instead, the company said it intended to use the proceeds “for working capital and other general corporate purposes.” mayo Use the portion “to acquire, license or invest in complementary products, technologies, or businesses.”

As it stands, QuantumScape’s operating loss nearly doubled to $186 million during the six months ended June 30. More importantly, although the company is on track to begin producing the first battery cells in a pre-test line in 2023, it may not be. Able to start large-scale production in 2025 as previously planned due to multiple challenges, including equipment shortages.

What now

So why is QuantumScape stock still up this week? After creating single-layer, four-layer, and 10-layer cells, the company has now built and tested a 24-layer prototype. The development has boosted investor confidence in the company’s lithium-metal solid-state battery technology, which could be a breakthrough in the electric car industry if successful, and they are willing to bet the stock no matter when QuantumScape starts commercial production or goes into production. first revenue.

Neha Chamaria does not have a position in any of the stocks mentioned. The Motley Fool does not have a position in any of the stocks mentioned. Motley Fool has a disclosure policy.

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