Why QuantumSpace Is A 'High-Level Short Squeeze Candidate'

Lithium metal battery maker QuantumScape Corp QS has gained nearly 220% since going public via an SPAC merger on Nov. 27.

The stock’s performance in the last two weeks is certainly impressive, but a spike in borrow rates suggests the big move may just be getting started.

Major QuantumScape Squeeze Coming? On Wednesday, S3 Partners analyst Ihor Dusaniwsky said QuantumSpace is rapidly approaching what could be a major short squeeze.

QuantumSpace has already accumulated $110.1 million in short interest, about 9.5% of its float, Dusaniwsky said. 

Related Link: JPMorgan Says Tesla's Valuation Is 'Difficult To Conceive In Any Imagined Scenario'

Workhorse Group Inc WKHS remains the most heavily shorted stock in the auto parts and equipment group, with $785.9 million in total short interest.

In addition to taking an aggregate $117 million loss on their positions so far in November and December, QuantumSpace short sellers are also paying stock borrow costs that topped 109% on Wednesday, according to Dusaniwsky.

At this point, S3 estimates QuantumSpace short sellers are paying about $350,000 in borrow costs per day just to maintain their positions.

“These losses, coupled with alpha-devouring stock borrow fees, has turned QS into a high level short squeeze candidate,” the analyst said.

Benzinga’s Take: QuantumSpace bulls likely see the stock as a way to invest in a potential long-term electric vehicle boom at a very early stage.

Yet QuantumSpace short sellers likely see the company as the latest example of an EV stock with a valuation exploding higher for no real reason other than irrational market exuberance for EV stocks.