That dip isn’t a surprise. Stock sales by startups tend to drive the price of shares down for a while. QuantumScape (ticker: QS) stock is down about 8% in after hours trading. In regular trading Monday, shares of the maker of solid-state, lithium anode batteries rose more than 8% on a generally good day for tech stocks. The Nasdaq Composite Index, for instance, rose 1.2%. The S&P 500 rose 0.7%.
The capital raise is a bit of a surprise. QuantumScape closed its merger with a special-purpose acquisition company in late November, just a few months ago. The merger brought about $700 million into company coffers. The company ended 2020 with roughly $1 billion on the balance sheet.
That is more than enough to get through this year year, as the company announced plans to spend about $260 million in 2021 to develop its technologies. What’s more, QuantumScape has another $200 million or so coming in as warrants, which are part of most SPAC mergers, are exercised.
But QuantumScape is still years away from commercialization. QuantumScape didn’t immediately respond to a request for comment on why the offering was needed, and its timing.
The company plans to issue up to about 15 million shares, including the option typically granted to underwriters to sell a little more stock if demand is high. That would amount to more than $950 million based on Monday’s closing price, effectively doubling the company’s cash balance.
The deal looks like a sound strategic move, but one that will leave investors wondering what the timing means for the value of their position. It will be a reminder to investors that young high-growth companies often need external financing. They don’t generate enough cash flow on their own yet.
QuantumScape has about 448 million shares outstanding, including warrants that are likely to be converted. The 15 million more shares represents about 3% of the total shares outstanding.
QuantumScape stock has been on a wild ride lately. The stock hit $132.73 in December before tumbling to trade below $45 earlier in March. Shares closed at $64.29 Monday, before the deal was announced.
Write to Al Root at firstname.lastname@example.org