Insights

Why QuantumScape Was Stuck in the Slow Lane Today

What happened

The charge was weak with QuantumScape (NYSE: QS) stock on the first trading day of the week. Shares of the next-generation electric vehicle (EV) battery developer were down by almost 6% in mid-afternoon trading on Monday, following the company’s announcement of a new capital-raising effort.

So what

On Friday after market hours, QuantumScape filed a prospectus for up to $1 billion in financing. The company listed several types of securities it might issue to raise these funds, including common and preferred stock, warrants, and debt instruments. Some of these might be combined into so-called “units” for investors.

In fairly typical language for such disclosures, QuantumScape said vaguely it aims to utilize the raised funds “for working capital and other general purposes.” The only other details the company provided is that these may include acquisitions and/or licensing of outside businesses and products; it stressed it currently has no commitments for such activities.

In what’s probably not a coincidence, the prospectus was issued two days after QuantumScape announced its second-quarter results. The pre-revenue company’s operational loss nearly doubled on a year-over-year basis, deepening to nearly $96 million. The net loss was just shy of $95 million, in sharp contrast to the nearly $81 million the company earned in the year-ago quarter.

Now what

Investors never like when their company goes to the well for a big chunk of change. That said, QuantumScape’s latest operational update offers glimmers of hope, chiefly the news that it has had success in developing a prototype 24-layer battery cell. If the development of this technology continues to advance, the company could become an important player in the EV space as a supplier, since manufacturers remain very hungry for advanced battery solutions.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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