QuantumScape Sinks, Bucking Optimism Among EV-Related Stocks

Electric-car battery developerQuantumScape Corp.’s shares sank the most ever on Monday after nearly quintupling in a month.

Monday’s drop made the battery maker a stark outlier in the sector as most EV stocks continued a weekslong rally, and marked a pause in a string of gains that saw QuantumScape’s stock price surge 388% between its Nov. 27merger with a blank-check company and Christmas Eve.

That rally pushed its market valuation to a high of nearly $50 billion last month, even though it isn’t expected to begin production of its solid-state lithium-metal batteries until the second half of 2024. The company is backed by Volkswagen AG, as well as Bill Gates and Khosla Ventures.

QuantumScape shares dropped 41% to $49.96 in New York on Monday. That puts its current market capitalization at around $18 billion, still much bigger than traditional auto suppliers such as Lear Corp. and BorgWarner Inc.

Potentially pressuring the stock, the company’s registration statement for the sale of its shares was declared effective by the Securities and Exchange Commission on Dec. 31. That means certain shareholders may now be able to sell QuantumScape’s stock, unless restricted.

Electric-vehicle companies and their suppliers have seen a surge in investor interest over the past few months, driven in a large part by a searing rally in the stock of industry front-runnerTesla Inc. The Elon Musk-led company, which was added to the prestigious S&P 500 Index in December, surged nearly 750% in 2020. That run helped to lift the stocks of many smaller entrants in the space, such as QuantumScape, as the market tries to spot the next Tesla.

Batteries are a crucial component of an electric car, and thelatest data from QuantumScape suggest that its batteries could enable a vehicle to run for 50% more miles than what current technology offers.

The data has not been road tested, however, and some say it’s not enough to justify the valuation the company commands. Mark Newman, an analyst at Sanford C. Bernstein in Hong Kong, said last month said the company still has “significant hurdles to commercialization.” Newman has the equivalent of a sell rating on the stock.

— With assistance by Crystal Kim

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