On Feb. 18, 2021, QuantumScape (NYSE:QS) hit an all-time and 52-week high of $71.97. Eleven months later, QS stock is worth 79% less.
Except for a brief revival in mid-November, the firm developing solid-state lithium-metal electric vehicle (EV) batteries has been on a gradual decline in value. However, I had been very optimistic about its potential in previous articles.
In my most recent comments about the company in December, I threw in the towel trying to figure out if QS had bottomed. Down over 30% since my Dec. 22 article; clearly, it hasn’t.
Is QS stock headed for single digits? I sure hope not for the sake of investors. However, I am having trouble finding anything investors can hang their hat on to justify the accumulating paper losses.
That said, while I threw in the towel on the subject of a bottom, something inside me suggests there’s still a glimmer of hope.
QS Stock Valuation
It is never easy valuing a company, let alone one that is not expected to have any revenue for a few years. And it certainly doesn’t help that QuantumScape faces several class-action lawsuits by shareholders who feel it has been less than truthful about its test results revolving around battery quality and performance.
InvestorPlace’s Samuel O’Brient recently said the following about this newest revelation:
“QS stock has been falling since news broke of the shareholder suit. After a sharp decline, shares are in the red by 6% as of this writing. Its performances for the week and month are worse, down 15% and 19%, respectively. While the stock is currently flatlining, there is nothing to indicate that it will rise.”
So, add a whole whack of legal trouble to zero revenues and you get a very unresponsive investor.
Let’s assume that all of the claims are false — it’s going to take months or years to sort out — but in the meantime, as my colleague points out, QuantumScape is assumed to be guilty in the forum of public opinion until it proves otherwise. Unfortunately, as O’Brient says, the proof might never surface. QuantumScape will slither away into the night, never to be heard from again.
With that in mind, it is hard to imagine QS stock remaining at $15.16 as I write this and a market capitalization of $6.39 billion.
What About Solid Power’s Stock?
I find it interesting that Solid Power (NASDAQ:SLDP) — a second public company developing all-solid-state EV batteries — also listed its shares on Nasdaq through a special purpose acquisition company (SPAC) merger.
My colleague suggested SLDP could grab a bigger piece of this market given QuantumScape’s current preoccupation with its legal troubles. But, frankly, I’ve stopped paying attention to most de-SPAC’s, so I have been blissfully ignorant of the Colorado-based company’s existence.
Solid Power announced its merger with the Decarbonization Plus Acquisition Corp III SPAC in June 2021. At the time, it had an implied value of $1.2 billion. Its market cap today is slightly higher than that. In addition, Ford (NYSE:F) and BMW (OTCMKTS:BMWYY) invested in the company’s $130 million Series B funding last May.
The merger was completed in early December. Its shares are down over 40% in the six weeks since. As far as I know, it doesn’t have any legal troubles. Further, if you look at its November 2021 Investor Deck, it doesn’t seem to have any outlandish revenue claims other than providing a slide that shows the growth in global passenger EV sales and the total addressable market ($305 billion by 2035) for EV batteries.
According to its financial statements ended Sep. 30, 2021, it had a nine-month operating loss of almost $19 million. That’s going to move much higher as the quarters pass. We know this from QuantumScape’s timeline.
I couldn’t say which is the better buy at this point. Both stocks are risky as heck.
The Bottom Line on QS Stock
In my December article, I suggested that investors with very thick skin could achieve Tesla-like (NASDAQ:TSLA) returns from QS stock over the long haul.
Last December, I wrote:
“But you’ve got to love volatility because it will be ever-present over the next five years. Innovation tends to do this. I like it, but I’m not prepared to say it’s bottomed. In this case, the third time’s not a charm.”
Now, with lawsuits aplenty, all bets are off. I don’t care that the company is getting into stationary power. The risks of it failing to execute do remain high.
I would not buy at this point until the legal picture gets a lot clearer. Govern yourself accordingly.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.