QuantumScape’s share sale to fund solid-state battery production roils its market value
QuantumScape has issued a share offering to pay for an expanded pilot production line for its solid-state batteries just months after it became a publicly traded company via a reverse merger.
QuantumScape said in a regulatory filing that the net proceeds from its sale of 13 million shares - along with an additional 1.95 million shares if underwriters exercise that option - could be much as $859 million based upon an assumed public offering price of $59.34 per share. The offering is expected to be priced after the market closes Wednesday, Bloomberg reported. The funds will be used to build a larger pre-pilot line called QS-0 and cover its part of a joint venture with Volkswagen Group for an expanded manufacturing facility known as QS-1.
Investors haven't responded well in the hours following the initial offering, with prices falling more than 13% since launching the share offering. The market's response is likely tied to the surprising timing of this share offering. Just six months ago, QuantumScape agreed to merge with a special purpose acquisition company (Kensington Capital Acquisition Corp.). At the time, 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.
QuantumScape worked quietly for years to develop solid-state batteries, a next-generation technology that could help unlock longer ranges and faster charging times in electric vehicles. The company 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 last year. That additional backing was to accelerate that joint development work, Thomas Schmall, chairman of the board of management of Volkswagen Group components, said at the time.
The heart of the VW-QuantumScape relationship is its 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 publicly disclosed plans to set up a pilot plant for the industrial-level production of the solid-state batteries. QuantumScape announced in September, just four months after that extra $200 million in VW investment, that it had agreed to merge with Kensington Capital Acquisition Corp.
QuantumScape announced in 2021 plans to expand its manufacturing capacity by adding a 200,000 square foot pre-pilot line facility in California. This pre-pilot line, called QS-0, will now have more than double the announced capacity, if QuantumScape is successful in its plans. The QS-0 is intended in part to provide the large numbers of additional samples QuantumScape needs for its solid-state battery development and to test and tune the systems and processes it intends to use for mass production, the company said.
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The pre-pilot line will also be used to produce enough prototype cells for Volkswagen and other automotive OEMs as well as prospective customers in other industries. QuantumScape said it expects to secure a long-term lease for QS-0 in the second half of this year and to be producing prototype cells in 2023.
QuantumScape has plans to also build a 21 GWh battery production line through its joint venture with Volkswagen.
The proceeds of this offering are intended to provide sufficient funding to build the larger version of QS-0, to fund QS-0 operating expenses, to fund our share of the equity portion of the joint venture's costs of building the QS-1 Expansion, net of debt intended to be incurred by the joint venture, and for working capital and general corporate purposes," the company said in the filing.
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