Short sellers are starting to use their malicious tactics to target the battery R&D industry

by Team HPQ

Most automakers have now committed to electrifying their fleets.

This has brought growing attention to batteries which are projected to enjoy massive market growth in the next decade. This has also attracted the attention of short-sellers, and that is a problem.

We explain in this blog article.

Short selling is a perilous market strategy in which an individual essentially bets against a publicly traded company.

In regular investing, the expectation is that a stock price will rise, thereby providing a profit to the investor, short selling is done with the expectation that the stock price will fall.

The process of short selling is simple—an investor or stockbroker borrows a stock, waits for the market value of it to fall, then repurchases the stock at a lower price to return it to the lender, making a profit off of the difference.

When successful, short selling can net an investor a reasonable short-term profit since stocks usually devalue faster than they appreciate. However, if the short seller miscalculates and the purchased stock rises in value, the losses could be devastating.

Investors’ losses are limited to the amount invested; a short seller’s losses depend on the given price of a stock, which could theoretically rise by an infinite amount.

A salient example of the dangers of short selling occurred when Reddit organizers grossly inflated the stock price of GameStop and AMC, resulting in billions of dollars in losses for the Hedge Funds short-selling those companies.

Make no mistake, there is a much more sinister side of short selling, one which threatens to undermine technological progress and innovation—progress that will be required to decarbonize global economies.

Short sellers have begun to spread misinformation about solid-state battery manufacturers that are promising massive advances in performance over current Li-ion battery technology.

This is problematic, especially as numerous reputable analytics and data outlets report that the demand for battery technology is expected to rise sharply in the foreseeable future with increased economic electrification. Due to its infancy and future market potential, the battery industry is incredibly secretive, which opens it up to bad-faith short sellers looking to cash in on poor industry practices.

battery-growth

Most automakers have now committed to electrifying their fleets. That’s brought growing attention to batteries, which still make up about a third of the cost of an electric car, and led to multibillion-dollar valuations of secretive startups. (BloombergQuint)

There is no set of metrics for third-party evaluation of solid-state batteries, which makes these companies very vulnerable to false information spread. One such example of bath-faith short selling occurred just this week when Scorpion Capital published a 188 slide report describing QuantumScape, a solid-state battery company, as a “pump and dump special purpose acquisition company” (SPAC).

This is despite the fact that QuantumScape announced earlier this month that they had met the requirements for an additional 100 million dollar investment from Volkswagen. Additionally, in February, Quantumscape revealed a breakthrough in its technology, during which time billionaire George Soros’s investment firm disclosed it had put capital into the startup.

The need for rapid decarbonization has sparked a new technological race with trillions of dollars in potential market value at stake. Investors should pay attention to leadership and company reputation over all else.

It’s essential to keep in mind the incentive that short-sellers have to be less than honest in their “analytical reports.” After all, they want these companies to fail. Bad-faith investment practices are damaging not only to the industries targeted but also to all of society, which has grown increasingly dependent on technology.

Technological innovation is no linear process. Ups and downs do occur, but as long as due diligence is performed before an investment is made, there is no reason to buy into hysteria being pushed by short-sellers.

Since 2015, HPQ Silicon Resources Inc has been working on developing a new one-step process to manufacture High Purity Silicon (Si) and transforming that Si into the nano size Si powders that batteries manufacturers need.

7 Comments

  1. Merci de nous rassurer car l’action dégringole rapidement et j’ai investie un bon montant. Par conséquent, la situation actuelle m’inquiète. J’ai confiance dans le produit et une bonne communication de votre part pourra rassurer les investisseurs honnêtes.

  2. Excellente mise au point. J’ai été en communication durant 25 ans et lorsque quelqu’un répand de fausses nouvelles il faut immédiatement le souligner,
    Bravo pour cette intervention.

  3. Thank you for the update. Stocks also fall in price when market makers (like shopkeepers) mark prices down to move stock and create a sale. The hedge funds are really acting in a a way that’s devoid of morals.

  4. Short selling should be made illegal! It is disruptive and depletes many investors’ portfolios who invest their money on company fundamentals and their own due diligence. When stocks get pumped (fake news), then dumped, it is absolutely unethical. But the people following this practice, including many hedge funds, don’t care about anything legal or ethical. They just like making money any way they can regardless of who they hurt. The playing field is NOT level at all for individual people, reputable institutions and companies whose staff and employees work hard to make viable, profitable, innovative, creative and helpful technologies/products/services which make the world a better place for all of us. Just ask the former employees/pensioners of Sears about the hedge fund manager that ruined their company and their pension plan, yet paid themselves dividends and bonuses. Short sellers gamble with other people’s money and we all suffer for it. It is time publicly traded companies of all sizes along with the provincial and federal governments stepped in and disallowed this unethical, albeit legal loophole to be stopped!

  5. Merci pour l’information sur les ventes à découvert. Ça fait longtemps que j’essais de comprendre le principe. Votre explication ci-haut, est pourtant bien claire pour des initiés, mais je ne comprends pas toujours comment ça fonctionne. Pourriez-vous nous donner une exemple avec des chiffres. Comment le shorter peut il m’emprunter des actions qui sont à un1$, et de les acheter plus bas, disons à .80 cents, et ensuite, me les remettre au prix de 1$.
    Je ne comprends pas le comment. Et, je suis que je ne suis pas le suel.

  6. This should be outlawed. The companies shorted should sue the pants off those leetches. Then the people shorting cry that the reddit people beat them and cost them huge money.
    Just criminals crying foul. So sad.

  7. Exemple de vente à découvert très simplifié:
    • Marc détient 100 000 actions HPQ avec RBC Brokerage
    • François est un vendeur à découvert – il estime que le prix de l’action HPQ (actuellement à 1,00 $) va baisser
    • François demande à RBC Brokerage de lui prêter les 100 000 actions HPQ de Marc
    • RBC le prête à François pour une rémunération bien inférieure au coût des 100 000 actions HPQ
    • Marc n’est pas informé que ses actions ont été prêtées
    • Lorsque François se voit prêté les 100 000 actions, il vend les 100 000 actions HPQ à 1 $ / action = 100 000 $
    • Le prix du HPQ baisse à 0,50 USD / action
    • François rachète 100 000 actions HPQ à 0,50 USD / action = 50 000 USD
    • François retourne les 100 000 actions à RBC Brokerage et les remet dans le compte de Marc
    • François a gagné 100 000 $ – 50 000 $ – frais RBC

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