Short selling data can help active investors protect their portfolios. Short sellers tend to be sophisticated, high-conviction traders. If they’re targeting a company, it can pay to approach the stock with caution.
In this report, we are going to highlight some interesting short selling activity at QuantumScape Corp (QS:US). QuantumScape is an American technology company that is engaged in solid-state lithium-metal battery development for use in electric vehicles. Its mission is to revolutionize energy storage to enable a sustainable future. The company is listed on the New York Stock Exchange and currently has a market capitalization of $10.6 billion.
QuantumScape: Short Selling Activity
Looking at the short selling data on QuantumScape, we see several red flags. Firstly, short interest is very high. Our data shows that, at present, 46.7 million shares are on loan. That represents approximately 26% of the company’s free float.
Second, utilization is very high at 100%. This tells us that demand for the stock from short sellers is elevated.
Finally, the cost to borrow the stock is currently 29.985%. This is also very high, which tells us, again, that demand from short sellers is elevated.
Overall, the stock has a Borrowing Activity Rating (BAR) of 10. A reading of 10 tells us that there is a high demand to short the stock at present.
Short Report From Scorpion Capital
In April, activist short seller Scorpion Capital published a scathing report on QuantumScape entitled ‘A Pump and Dump SPAC Scam By Silicon Valley Celebrities, That Makes Theranos Look Like Amateurs’.
Scorpion Capital, which is led by Kir Kahlon – who has focused exclusively on short selling since 2013 – says that it conducted 15 in-depth interviews in its research on QuantumScape, including interviews with former R&D employees, leading solid-state battery experts, and Volkswagen (a QuantumScape partner) employees. Its research led the firm to conclude that:
- QuantumScape’s key scientific and technical claims are “misleading, grossly exaggerated, or fraudulent”.
- QuantumScape’s prototype is “not viable outside of a lab” and that there are red flags around scaling manufacturability.
- QuantumScape’s lead investors have “a track record of backing frauds and failures in the EV battery and cleantech space”.
- There are “warning signs of a pump and dump”. It says that retail investors are at major risk as the lockup expires and insiders can dump the shares.
“Our research leads us to conclude that the company is no different from other recently exposed SPAC promotions and EV frauds,” wrote Scorpion Capital in its report.
Short sellers don’t always get it right. However, looking at short interest data here, we think caution is warranted towards QS stock at present. The data indicate that Scorpion is not the only institution that is bearish on QuantumScape stock right now.