Scorpion Capital calls QuantumScape a scam, initiates short position

© Reuters.

By Samuel Indyk – Shares in QuantumScape were trading lower in early trade after activist short seller Scorpion Capital called the company a scam.

The short sellers announced they had initiated a short position before the market opened.

“We are short QuantumScape (QS): A Pump and Dump SPAC Scam By Silicon Valley Celebrities, That Makes Theranos Look Like Amateurs,” the short seller said on Twitter.

In the full 188-page report, Scorpion Capital says that QuantumScape’s key scientific and technical claims are misleading, grossly exaggerated, or fraudulent.

QuantumScape background

Quantumscape (NYSE:) plans to revolutionise the electric vehicle market by creating solid-state lithium-metal batteries that, in theory, should provide a greater range, shorter charging time, and longer lifespan.

At the end of last month, QuantumScape announced they had successfully met a technical milestone that was a condition to close additional investment of $100 million from Volkswagen (DE:).

“We are pleased to report that the QuantumScape cells met the technical milestones in our labs in Germany that we had previously agreed upon,” said Volkswagen’s Frank Blome in March.

Other investors in the battery maker include Germany’s Continental (DE:) and China’s largest automobile manufacturer SAIC Motor Corp Ltd (SS:).

Scorpion Capital claims

Scorpion Capital has interviewed 15 individuals with links to QuantumScape, including nine former R&D employees, and alleges that their research concludes the company is no different from other recently exposed SPAC promotions and EV frauds. They allege that QuantumScape’s six key technical claims lack credibility and exhibit Theranos-like red flags.

Theranos refers to the health care company founded by Elizabeth Holmes that alleged to have created a blood test that required tiny amounts blood. Its valuation soared to over $9bln before its technology was questioned and people realised the company’s claims were false.

Scorpion Capital believes that Volkswagen’s investment (“the smart money”) in QuantumScape “lends credibility to the scam”. However, after Dieselgate and the recent Voltswagen prank, they are not sure that “smart money” is the best term used to describe the company.

At 15:00BST, shares in QuantumScape were trading lower by 5% at $38.75.

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