Insiders are dumping QuantumScape stock: Is a crash coming?

QuantumScape stock price has gone through a short squeeze this year after the company made substantial progress on its manufacturing process. QS stock soared to a high of $12.38 on Thursday, its highest level since July 25. It has jumped by 260% from its lowest level this year.

Why QuantumScape stock has soared this year 

QuantumScape share price has soared this year after the company successfully integrated the Cobra manufacturing process, which is a new high-throughput method for manufacturing solid-state ceramic separators.

Cobra replaced the previous Raptor process, which will lead to a 25x faster heat-treatment throughput and use a smaller floor space.

The company is now in the testing process of the cobra manufacturing process and has already deployed its battery to a Ducati motorcycle. It will then ship to real-world vehicle testing in 2026.

The company hopes that the Cobra process will enable it to simplify the manufacturing process and build its batteries at scale. In this case, its recently announced partnership with Murata Manufacturing will help it achieve scale.

QuantumScape stock price also jumped after it expanded its partnership with PowerCo, a company owned by Volkswagen, its biggest customer. In an announcement, the company said that it would receive $131 million from PowerCo in the next two years to support the joint commercialization process.

The QS stock price also jumped after the management revealed that it had secured a partnership with another major automaker that will use its batteries. This is a major update towards its commercialization efforts.

Major challenges remain 

Still, the QuantumScape stock faces major headwinds that may lead to a crash in the coming months.

First, the company continues to lose millions of dollars a quarter, as it has not yet generated any revenue. Its net loss in the last quarter was $114 million, bringing the year’s loss at $229 million. This loss-making will likely continue even when the company starts shipping its batteries, which may push it to raise more money  

Second, insiders are selling the stock aggressively. Barchart data shows that Jeffrey Straubel, an independent director in the company, has been selling his shares in the past few months. 

Altogether, insiders have sold over 4 million shares in the last 3 months and 6.09 million in the last 12 months. Insider selling is often seen as a bearish factor as these individuals normally have material information about the company.

Third, short-sellers are still piling into QuantumScape as they expect a reversal. It has a short interest of 10%, which is substantially higher than most companies.

Furthermore, the case for solid-state batteries is being challenged by new batteries from Chinese companies like BYD and CATL, which can be fully charged in under 10 minutes.

QuantumScape stock price technical analysis 

The daily timeframe chart shows that the QS stock bottomed at $3.3 in April as the trade war started and then went parabolic to a high of $15, its highest point on July 18. 

The stock then pulled back and bottomed at $7.40, its lowest level on September 4. It has now rebounded as bulls target the year-to-date high of $15.

The risk is that it is about to form a double-top pattern, which often leads to a bearish breakout. Therefore, if this happens, it will rise by about 23% and then resume the downtrend.