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Scammy SPAC Or Buying Opportunity?

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Special Purpose Acquisition Companies- one of the most popular investments made by people our age in the last year. For those following SPACs, you may be familiar with Quantumscape (NYSE: QS). QuantumScape, the popular battery SPAC startup had quite the run initially as it rallied towards $134, but has since sunk 72%.

QuantumScape sunk 10% this week after announcing a Panasonic manufacturing executive to their board and signed a huge lease for a manufacturing plant for batteries in San Jose. With bullish news like that and the market reaching all-time highs, you would think it would go up, right?

Wrong. Investors you must ALWAYS look under the hood. A short-seller report came out by Scorpion Capital, basically calling QS a scam. They compared QS to Theranos, which defrauded many big investors. The report they released they claimed is backed up by interviews with former Quantum employees.

Have short sellers not learned their lesson? We were all a part of the retail revolution against the hedge funds, I get it. We as Gen Z's want to beat Wall Street and have a win as the Main Street. As a result, I know many are having doubts against Scorpion Capital claiming that they're just "haters" with no evidence against a great battery company.

Short sellers have a bad rep among our age group and GME has given us excitement to find the next short squeeze. From a value perspective, with QS down 72% from highs, it's starting to become an attractive buy. The problem is: if you are buying with the hope of it "having" to go up - you are wrong.

Based on the information in front of us, how do we know Scorpion (who has a short position on the stock) is not just trying to profit off the report? After all, it is an allegation of fraud. They are making money off this stock going down. Keep in mind QS has some pretty serious support from Volkswagen and Bill Gates.

Related content: Benzinga's Full SPAC Calendar

What's next? The allegations of this report are pretty serious. As a result, the number one thing we need to do is see how management responds to this. They have so far responded via Twitter by a series of tweets.

In some ways, this stock reminds me of NKLA which had a similar-like plunge after being labeled a scam by a short seller. NKLA also had backing from General Motors.

At the end of the day, as investors, it is our job to do our due diligence.

 

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Posted-In: Short Sellers Opinion