(Bloomberg Opinion) — One of the most unsettling developments in business in 2020 was the trend for electric-vehicle companies to list on a stock exchange before they have their first revenues. Though standard practice for research-intensive life sciences companies, going public before you have a purchasable product is pretty unusual in the automotive world.And yet, pre-revenue companies such as Nikola Corp. and Fisker Inc. have achieved multi-billion dollar valuations. Now, Californian battery start-up QuantumScape Corp. has taken electric-vehicle mania to a new level. Founded by Stanford University scientists a decade ago, with financial backing from Volkswagen AG, QuantumScape became a public company in November after merging with Kensington Capital Acquisition Corp., a special-purpose acquisition company. The company won’t generate significant revenue until 2026, but it’s already valued at $43 billion, or $51 billion on a fully diluted basis.(1)From a climate perspective, it’s great that investors are committing capital to electric transport. The promise of such riches will encourage others to join the emissions-cutting cause. However, the same speculative fever that has propelled Tesla Inc. and China’s NIO Inc. appears to have taken hold of QuantumScape investors.An average of $2.8 billion of the battery company’s stock was traded daily during the past week. Technical factors may have contributed to QuantumScape’s surge, too: Only a small percentage of the shareholder register is available to trade.(7) For retail investors who buy stock at these levels, there’s a long way down.First, the good news. In laboratory tests QuantumScape’s “solid state” battery cells have achieved very encouraging results, which suggest the innovative chemistry could one day enable electric vehicles to travel further and be charged faster, at lower cost.(2) This is exciting because it’s become harder to extract significant performance gains from conventional lithium ion batteries. Chief Executive Officer Jagdeep Singh’s team of scientists appears to have pulled off a real feat. However, when the SPAC deal was announced in September the parties decided a $3.3 billion valuation was appropriate.(6) This seemed ample for a company with fewer than 250 employees and one which doesn’t have a finished product or factory. Following a blistering stock-market run, QuantumScape is now worth more than 10 times that initial value, and more than automakers like Ford Motor Co. and battery giants such as Panasonic Corp. and Samsung SDI.Those who bought shares in the Kensington SPAC in August have enjoyed a 1,060% return, while QuantumScape warrants that once sold for 80 cents are now worth 50 times as much.(3) The three Stanford founders — Singh, Fritz Prinz and Tim Holme — have become paper billionaires. Volkswagen, which invested about $300 million in QuantumScape, will own a 23% stake worth almost $10 billion. (4)As is often the case with SPACs, the Kensington sponsor — controlled by Justin Mirro, a former Moelis & Company and RBC Capital Markets investment banker — has also done well. It received shares and warrants worth more than $900m, a huge return on its $7 million or so investment and one achieved with only a few weeks work.(5)QuantumScape’s other prominent backers include venture capital firms Khosla Ventures and Kleiner Perkins, Microsoft Inc. cofounder Bill Gates, hedge fund billionaire George Soros’s Quantum Partners and investor Jeremy Grantham. JB Straubel, a former chief technology officer at Tesla, is on the board. Such endorsements, and the years of R&D that have gone into the batteries, suggest there’s more here than just hype. The contrast with Nikola, whose own technology (or lack of it) was the subject of a scathing short-seller report, seems clear.(8) Volkswagen’s production expertise should smooth the path to commercialization. The partners plan to start production at a small pilot facility in 2024, and then at a much larger factory two years later. But success isn’t guaranteed.So far QuantumScape has only produced single-layer cells and it still needs to find a way to stack more than 100 on top of each other to create a battery package. Competitors such as China’s Contemporary Amperex Technology Co., won’t sit by idly. CATL’s shares have also surged this year, valuing it at about $110 billion.One advantage of SPACs is that they’re allowed to publish detailed multiyear financial forecasts, whereas companies that go public via a traditional initial public offering usually only publish historic finances. Given QuantumScape’s significant production hurdles, it would be imprudent for investors to over-rely on these estimates, but whatever happens they’re in for a long wait: Even assuming QuantumScape’s forecasts prove accurate, the valuation looks disconnected from reality. The market capitalization is equivalent to 13 times the revenue the company hopes to generate in 2027. Tesla shares are also incredibly frothy but they’re a comparative steal at slightly more than 13 times its expected revenue in the next 12 months. Volkswagen, which will be QuantumScape’s biggest customer at first, is valued at just 0.3 times next year’s sales.QuantumScape’s batteries may end up propelling the next generation of electric vehicles, but sustaining that valuation could prove even more challenging than advanced battery chemistry. (This column was updated to remove a comparison with Alphabet’s stock trading volumes, because the reference didn’t account for all of the company’s trading lines.)(1) The fully diluted 447.5 million share count includes unexercised stock options, restricted stock units and additional shares issuable to Volkswagen.(2) The SPAC’s public shareholders account for only 5% of the shareholder register. Existing QuantumScape shareholders hold 82%, some of whom aren’t sellers or are subject to lock-ups.(3) QuantumScape’s design doesn’t require a manufactured anode, which keeps costs down. The lithium-metal anode is formed when the cell is charged.(4) When adjusted for QuantumScape’s cash.(5) If QuantumScape elects to redeem them, the warrants will convert to a maximum of 0.365 shares.(6) Volkswagen owns 71 million shares of QuantumScape but will be issued another 15 million subject to achievement of a technical performance milestone, according to the S-1.(7) Kensington sold shares in an IPO on June 30 and had already signed a non-binding letter of intent with QuantumScape just three weeks later.(8) QuantumScape also has far more patents, for example.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. 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