Short Seller Says QuantumScape Is A Pump-and-Dump Scam

QuantumScape shares dropped as much as 15% Thursday when an investment firm issued a damaging report on the firm’s progress. Scorpion Capital issued a report titled “A pump and dump SPAC scam by silicon valley celebrities that makes Theranos look like amateurs.”

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Fraudulent Battery Claims

The report’s basis consists of interviews with former QuantumScape employees, battery experts, and current Volkswagen employees tasked with electric vehicle battery efforts. Scorpion said that QuantumScape's technical claims on its highly guarded battery technology are misleading, exaggerated, or fraudulent.

“Our research indicates that QuantumScape can't even reliably make test cells that work,” the report said. In addition, the entire company has “red flags around scaling and manufacturability render QuantumScape's cells a pipe dream.”

Solid-State Battery

QuantumScape is currently working on a scalable solid-state battery that promises great improvements. It promises quicker charging times and a longer range. In fact, QuantumScape claims that once completed, their solid-state batteries can charge up to 80% in just 15 minutes.

In addition, their breakthrough technology means lower costs for electric vehicle makers compared to existing lithium-ion batteries. Auto giant Volkswagen, intrigued with the potential, invested $300 million into the company. Volkswagen and QuantumScape earlier announced a 2025 target to start the production of solid-state batteries.

Meanwhile, stockholder Scorpion Capital said they’re skeptical about QuantumScape’s ability to deliver on its promise. “A key feature of the largest frauds is often the backing of a famous investor or corporate partner, in this case, VW – ‘the smart money' – that lends credibility to the scam,” Scorpion Capital said.

However, Scorpion believes Volkswagen became an unwitting partner that lent credibility to QuantumScape. The report likened the partnership with how Nikola managed to partner with General Motors or Theranos with Walgreens and Safeway.

QuantumScape Won’t Have A Product Out In The Next Ten Years

In their scathing report, Scorpion Capital included 15 in-depth research interviews. This included talking to nine former R&D employees, four leading solid-state battery experts, and two Volkswagen employees assigned at its EV battery effort.

Among the highlights are doubts that QuantumScape achieved what they said they did. Asked if they solved the problems that “impeded solid-state batteries for the last 50 years,” a former employee said no.

Will they have a product ready within the next ten years? The former employee said, “Absolutely not.”

The report also details their findings on why the company's six key technical claims are wrong. For example, QuantumScape can’t even reliably make functioning test cells. These findings led the capital firm to conclude that the battery technology company lacks credibility.

Fingers Point to QuantumScape CEO

Also, the findings directly contradict what QuantumScape CEO Jadreep Singh says in interviews. Former employees said that Singh is the main source of the misinformation. The CEO reportedly does not allow dissenting opinions.

In addition, Singh also controls the information given to the media. As a result, Singh is publicly making bold claims in the hope that the data will catch up in time.

Right now, results are taking too long, and they are far from satisfactory. “I’ve worked for many CEOs, and I’m more in the camp of being honest with your investors. That’s not the Quantumscape way,” remarked one former employee.

Scorpion Capital Is A Short Seller

In all fairness, Scorpion Capital disclosed that they are short shares of QuantumScape. “Scorpion Capital LLC is short QuantumScape,” it reported. The company “therefore stands to realize significant gains in the event that the price of its stock, bonds, options, and/or other securities decline or change,” it added. Quantumscape closed Thursday at $35.85, or a loss of 12.20%. They have yet to reply on the issue.

Watch the CNBC TV video report asking if Quantumscape is a pump-and-dump scam. According to short-seller Scorpion Capital, the answer is yes:

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Do you believe the allegations made against QuantumScape? Or, do you think Scorpion Capital is simply making a play to benefit from lower Quantum stock prices? Let us know what you think by sharing your comments below.