There are some stocks that literally divide opinion. The shares of QuantumScape (QS) fall into this category. While some believe that the developer of solid-state batteries is already on its way to the next battery revolution, others point to the company's huge cash burn rate combined with zero sales and a valuation in the billions. As is often the case, the truth may lie in the middle. Admittedly, the share prices may have run ahead, but if the Silicon Valley startup succeeds in making a breakthrough with its solid-state batteries, a market worth billions will open up.
Optimism was already high at the time of the company's IPO in the fall of 2020. On the first day of trading on Wall Street, QS stock exited with a gain of about 50 percent. There are several reasons for the enthusiasm for the San Jose, California-based company. QuantumScape, for example, is active in the future market of solid-state batteries. More than 200 scientists and engineers, including Tesla CEO Elon Musk's former right-hand man Jeffrey Brian Straubel, are currently hard at work researching the next generation of vehicle batteries. The solid electrolyte has numerous advantages over current lithium-ion units. For example, the technology enables significantly higher storage capacities with a parallel faster charging process. In addition, they are considered less temperature-sensitive and age more slowly.
New tests conducted by the company underline the superiority: within a quarter of an hour, the QS batteries reach around 80 percent of their maximum charge capacity. That is about twice as fast as the lithium-ion batteries currently used by the automotive industry. As a result, vehicles with the Californians' electricity storage systems can cover a distance that is around 50 percent longer than those with previous battery technology.
In view of these prospects, it is not surprising that renowned investors are already on board with QuantumScape. These include Volkswagen, which has already invested hundreds of millions of US dollars in the Stanford University spin-off in recent years. The Germans are the largest QS shareholder from the automotive sector. VW considers solid-state technology to be the most promising approach for the future of electromobility. For example, the group believes that e-cars will achieve ranges equivalent to those of an internal combustion engine with the same battery size. Other investors from the early days of the company, which was founded in 2010, include Bill Gates and the German automotive supplier Continental. George Soros, on the other hand, has newly discovered e-mobility. The famous hedge fund manager invested a three-digit million amount in QuantumScape in mid-February.
Higher energy density, more power and longer ranges are one side of the coin; bringing the technology to mass production is the other. In order to be able to set up large-scale production of solid-state batteries in the medium term, QS is currently asking for cash by issuing 13 million new shares. The expected USD 859m in proceeds will go towards the company's pilot plant, which was announced back in February. The plan is to more than double the capacity of the "QS-0" plant. In addition, QuantumScape is putting fresh money into its joint venture with VW. The duo is planning another pilot plant "QS-1" with a capacity of 1 GWh, which will later be successively expanded to a total capacity of 21 GWh for series production.
Since the IPO last year, QS shares have shown high swings in both directions. The announcement of the recent capital increase caused additional volatility in the stock market newcomer. The high volatility can be converted into returns with Barrier Reverse Convertibles. Leonteq has structured two new softcallable BRCs with high risk buffers of more than 50 percent and double-digit percentage coupons. The CHF product offers a yield potential of 15.00 percent p.a., while the second variant of the barrier reverse convertible based on USD even offers a maximum yield of 16.00 percent p.a.. For both versions, the barrier is fixed at 49 percent of the starting value. In addition, the securities are equipped with a soft callable function. The first observation date takes place after six months and is then repeated quarterly.
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