Volkswagen-backed QuantumScape to go public via SPAC to bring solid-state batteries to EVs

QuantumScape, the solid-state battery company backed by Volkswagen Group, has agreed to merge with a special purpose acquisition company Kensington Capital Acquisition Corp. as it aims to raise the capital it needs to commercialize solid-state batteries for electric vehicles.

The merger will give QuantumScape a post-deal market valuation of $3.3 billion.

QuantumScape said it was able to raise more than $700 million through the business combination, a figure that includes $500 million in private investment in public equity, or PIPE. The raise was anchored by institutional investors including Fidelity Management & Research Company and Janus Transaction. The combined company will be named QuantumScape and is expected to remain listed on the NYSE and trade under the new ticker symbol QS."

The merger and associated PIPE transaction will fund the company's plans to first production, according to QuantumScape founder and CEO Jagdeep Singh. Numerous automakers have pursued solid-state batteries, but challenges such as cost have hampered efforts to commercial the technology.

Electric vehicles on the road today are equipped with lithium-ion batteries. A battery contains two electrodes. There's an anode (negative) on one side and a cathode (positive) on the other. An electrolyte sits in the middle and acts as the courier that moves ions between the electrodes when charging and discharging. Solid-state batteries use a solid electrolyte and not a liquid or gel-based electrolyte found in lithium-ion batteries.

Developers claim that solid electrolytes have greater energy density, which translates into squeezing more range out of a smaller and lighter battery. Solid electrolytes also are supposed to be better at thermal management, reducing the risk of fire and the reliance on the kinds of cooling systems found in today's EVs.

Summer of the SPAC

QuantumScape joins what appears to be a seemingly endless line of venture-backed companies that have eschewed the traditional IPO path and instead opted to go public via a reverse merger with a SPAC, or blank-check company. QuantumScape is also part of a smaller and notable group of electric vehicle-related companies that have announced plans to go public via a SPAC. EV companies Canoo, Fisker Inc., Lordstown Motors and Nikola Corp. have gone public, or announced plans to, via a SPAC merger this spring and summer.

Unlike some of the companies in this new batch of SPACs, QuantumScape can hardly be called a startup. The Stanford University spinout has been working for a decade on developing solid-state batteries and designing a scalable manufacturing process to commercialize its battery technology for the automotive industry.

Volkswagen venture

QuantumScape attracted attention and capital early on from high-profile venture firms like Kleiner Perkins and Khosla Ventures. Volkswagen entered the picture in 2012. The automaker has invested a total of $300 million in QuantumScape, including $200 million this year.

The heart of the VW-QuantumScape relationship is a joint venture, which was announced in 2018, that aims to accelerate the development of solid-state battery technology and then produce them at commercial scale. The companies have plans to set up a pilot plant for the industrial-level production of the solid-state batteries. Volkswagen said in June that plans for the pilot factory will be firmed up" sometime this year.

QuantumScape's board is also loaded with notable investors and experts in the electric vehicle industry, notably former Tesla CTO and Redwood Materials founder JB Straubel, who called QuantumScape's solid-state anode-less design the most elegant architecture I've seen for a lithium-based battery system."

Kensington Chairman and CEO Justin Mirro will also join the combined company's board of directors.