DCRC - Solid State Battery Technology for Electric Vehicles

DCRC is a SPAC for Solid Power, a company working on solid state battery technology. If you don’t know why solid state batteries are a big deal Google it. Higher power density, safety, and fast charging are key factors. After listing in the summer, they had a nice run up to $13/share. Since that time the chart flattened around $9.8-$10 with a recent spike to $10.7. With TSLA news generating a lot of EV buzz I think this stock could be primed for a move up.

The 1 Month chart shows resistance at $10. However, there could be a head and shoulders forming.

The 4 Month chart seems to show a cup and handle forming.

If we consider the top of the recent peak around 10.7 the edge of the cup, we should expect a handle retracement of 50% to hit in the $10.13-$10.20 area, which is where it currently sits.

I’m going to keep watching this one. I think with Tesla generating a lot of buzz this stock may also get some attention. They posted some test results a week ago (followed by a sharp drop on the chart) showing effective safety features of their technology. However, the fact that they use sulfides is a concern. You can read more about that here.

1st of this month (oct) they announced $12.5M in funding from the government.

70% of float is held by institutions. $441.438M. That means $132.4M is open for trading. About 13M shares.
Edit: This sentence is incorrect. See below Oct 24 update.

They plan on converting sometime Q4 2021 being listed as SLDP. When they do, I expect the price to go up based on their potential.

Solid Power is backed by Ford and BMW. They probably won’t be profitable for a long time, but they have solid funding and if they’re able to develop reliable production batteries Ford will buy a ton.

I’ll be keeping an eye on this one.

Update Oct 21 AH

There’s been a rejection of the head and shoulders pattern. I entered yesterday with the 11/19 $10C option. I suppose it bounced off the resistance at $10 yet again. That $10 price seems rock solid as support.

Update Oct 24
The stock fell back down to about 10.22 from the 10.85 peak. I plan on acquiring some more options or potentially shares this week.

After reading financials and tech info I’ll share some highlights.

Business Model
The strength of Solid Power’s technology is that they are not trying to spin up huge cell manufacturing lines, but rather to integrate their technology into existing lithium production lines. Don’t get me wrong. They want to spin up their own manufacturing, but they intend on licensing their tech to the automakers. This focus is a big deal because manufacturing is a huge money suck. It’s painful. It’s difficult. They’re smart to focus on R&D and licensing.

Financials
After closing the most recent round of funding, they claim to have enough money to last them until 2026, which is when they predict full-scale production manufacturing. Here’s a slide from their investor presentation where they claim to be set on cash:

Investor Commitment
Ford and BMW aren’t just throwing money. They intend to use this technology. SP’s IP was developed in partnership with these companies. If SP were to fail, one of these companies or a competitor would likely snap up all the infrastructure and IP at a premium.

Differentiation
Solid Power’s biggest competitors are either not fully stolid-state, use a different technology, or don’t have the full portfolio of solutions. They’re also manufacturing plays. This gives SP a big advantage imo. SP also has produced working prototypes with demonstrated superior performance. Much further along than most of their competitors.

Risk
The largest risks to the business, imo, are the following:

  1. A technology superior to solid sulfide electrolytes will emerge before 2026+ profitability, rendering the technology obsolete. The solid state battery technology landscape is bursting with possibility, startups, etc. It’s the step-change level of performance that ensures the future is electric. If something comes out between now and 2028ish their stuff will be obsolete. the way their stuff will make Li-ion obsolete.
  2. EV adoption globally may experience friction due to factors such as supply chain constraints, lithium under-production, manufacturer scalability, unfavorable public policy, or other factors. This reduces the total market available for SP’s products. Much of their estimations are based on an assumption that the EV market will reach a certain size globally by 2028.

Another update on financials. I seem to have misrepresented the value earlier. Here’s a slide from a recent investor analyst presentation:


I’m still learning financials, but it appears that DCRC’s valuation is only a portion of their 1.2B self-valuation, assuming $10/share of DCRC. This is likely why DCRC is continually pumped up above $10/share. So when I said the float was $132M above, I was incorrect. The entire value of DCRC is considered the float.

Having said all that, I’m sure you’re wondering, why should I be interested in this company? I want to make money now, not in 2028!

Great point. SLDP will list this fall/winter at whatever DCRC is. What will happen to existing share ownership? I predict that a lot of high tech etfs, especially the overpriced EV tech etfs, will snap these up like hotcakes. This will rocket the share price, at least initially. With 70% held by the likes of Ford, BMW, Volta, and others who have a long term vested interest in the project’s success, that float will remain locked away in their vaults.

I’m buying a few shares and playing 12.5-15 calls through december 2021. I don’t think DCRC is going to fall below 10/share throughout, so I plan on buying calls when/if it drops to 10 and selling when it has little runups.

Oct 28 PM:
Last night Solid Power announced a partnership with SK Innovation along with a $30M investment from SK. SK, who already makes lithium ion cells, will work on manufacturing using Solid Power’s technology. SP will focus on their tech and licensing. A great move for SP. Stock is up from 10.61 close to a high of 11.63 in PM.

Oct 29 AH:
It’s been a good day. A consistent run up to 12.4 from an $11.08 open was phenomenal. My 11/19 12.5C were up well over 100%. There is a big buyer at the $12 mark that kept it up the rest of the day, finishing at 12.2. Huge volume at that price point. I’m hoping for a pullback so I can buy some more, but if not, I’ll ride these bad boys into next week and roll into decembers.

Nov 1 AH update
Another green day. The price action showed a crack today for the first time since the SK partnership announcement. I think the momentum from that news may run out of gas this week, leading to consolidation and then some selling. I would like to see a move back below 12 for a good entry. But they may announce the reverse merge any day now. That is the catalyst I expect will lead to a run. I’m buying Dec calls this week because I don’t like the theta on the Nov 19s anymore.

Nov 4 late hours:


I’ve decided to put DCRC up against QS stock performance. You can see that they sort of match a little. To me, this indicates that there’s some hype around this technology and people are diversifying. I was looking at QS earlier today and thought that it looked pretty overvalued. I was super close to buying puts on QS. Too bad I didn’t. I’m going to keep an eye on this correlation to see if they stay somewhat in sync.

Having said that, DCRC is headed down today and I am hoping for that $12 pullback I’ve been talking about for a really nice entry.

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Looks to be in a consolidation pattern right now. You should probably have an answer tomorrow, but wait to see which direction it goes. 1 hour MACD looks like a possible downtrend coming up.

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This sounds interesting. Keep us posted

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I’ve updated it with today’s information. If someone could be so kind as to critique my DD I would appreciate it. I’m specifically interested in the answer to this question:

What happens to call options and shares when SLDP lists on the stock exchange as itself instead of as the SPAC?

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10.85 this morning! Calls are printing.

I’ve discovered that options transfer to the new company once the merger/reverse merger whatever it’s called is complete. So all clear there.

I read a bunch of investor docs including financials and information about their technology. I’m a mechanical engineer, software engineer, worked at a polymer failure analysis laboratory, and have worked in manufacturing. I’ve added some more information to the post based on my findings.

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yeah, this is one play I am hoping works out. the warrants have been giving nice gains, got in under $2 awhile ago. with spacs not being as hated as before I am hoping people buy in after the merger, maybe get lucky and get a QS style run. who knows these days.

one negative going against DCRC is the fact that I own it

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Last night Solid Power announced a partnership with SK Innovation along with a $30M investment from SK. SK, who already makes lithium ion cells, will work on manufacturing using Solid Power’s technology. SP will focus on their tech and licensing. A great move for SP. Stock is up from 10.61 close to a high of 11.63 in PM. My 12.5 calls are doing well!

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i like this play, considering battery tech evolution has been painfully slow, i think the incremental step approach actually has more merit than trying to solve every problem approach. i also agree manufacturing is a key problem/risk in this (scaling seems to be difficult), looking to enter on a pullback

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Say DCRC has similar movement as QS after despac…. QS went from $10 to $131 in 30 days. As of market close Friday DCRC FEB 2022 $20 calls were $155 ($1.55). So assuming DCRC does mimic QS’s activity and reaches the price point of $130, you could net 7000% gains for relatively low capital. $155 → $6800.

I realize they are different companies and shares outstanding may differ which would impact price action.

Could someone tell me why I’m stupid or make me feel better about my assumptions.

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Great question.

Here’s a few things to consider. I’ll use DCRC and SLDP interchangeably.

QS currently trades at $30/share, not $130. Investors may see this compared to their initial runup and be less excited.

QS is a manufacturing play, not a licensing play like SLDP. This means that QS may have more profit eventually because they took on more risk. They also have more capital assets.

QS was valued at $3.3 billion at their SPAC funding compared to SLDP at $1.2B.

5.1% of QS shared were offered during the SPAC compared to DCRC’s 19%. A lot more shares available for trading.

You can find QS’ investor presentation here: https://s26.q4cdn.com/263384136/files/doc_presentation/QuantumScape-Analyst-Presentation-Oct2020.pdf

I don’t think this represents a 7000% upside because of the precedent and the different valuations, business models, and float. It would also require selling at the exact right time, something I’m pretty confident I won’t do.

However, I do think there is a lot of upside. And that’s what I’m basing all this on. I am looking for a price target of $25-30/share.

EDIT:
I do want to point out that QS says they expect profitability in 2028 and SLDP says they expect theirs in 2027. This is likely because SLDP is planning to use existing Li-ion production facilities and integrate their tech into the process while QS has to create a new way of mass producing batteries.

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Good call mate and thank you for the DD.
I am already +13% gains on the stocks.

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Nov 1 PM:
My Nov 19 12.5 calls are ITM. I’m looking at rolling into Dec 17s.

This stock has had a great run since the original post. I am really hoping for a pullback to the $11-$12 range over the next few weeks so I can average down.

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doing nicely, my warrants and commons printing. wish I would have loaded more commons, not sure I want pullback to make that happen tho. now I’m debating selling the warrants or not

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looks like the vote date for the merge was announced Reddit - Dive into anything

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definitely going to regret not selling those warrants for 5 yesterday

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A noobish question, but I am learning!
Since the merge date was announced, what would be the likely play around this? what kind of behavior we wish to happen?

I would like to see the reverse merge go through on Dec 7 and then see the price run up so I can offload my options. The fact they announced it on schedule within Q4 2021 is a good sign. But that’s the reason you don’t see much happening right now with the price action. This is just in line with expectations.

I think that the price will hit $25-$30/share post deSPAC, as I’ve said before. If you agree, those December options and shares are pretty cheap.

In the event the reverse merge is voted down all bets are off. I expect a return to $10/share. That’s the risk you’re taking with a SPAC.

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If you were looking for an entry, this is probably a decent one.
image

I foresee a further downtrend to the 10’s, I’m still watching and looking for entry towards the end of the month

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