QuantumScape Announces Response to SEC Guidance Applicable to Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)
QuantumScape Corporation (NYSE: QS, "QuantumScape,” or “Company”) is announcing that as a result of recent guidance provided by the SEC on April 12, 2021 regarding the accounting and reporting of warrants issued by SPACs (the “Staff Statement”), it will restate its consolidated financial statements as of and for the year ended December 31, 2020 to change the accounting treatment of its public and private placement warrants (“Warrants”).
There will be no cash impact to QuantumScape’s business or historical financial statements in the affected period due to this restatement. The change in the accounting treatment of the warrants has no effect on QuantumScape’s ongoing operations or future plans.
The restatement pertains to the accounting treatment for Warrants that were outstanding at the time of the business combination of the legacy QuantumScape Corporation with Kensington Capital Acquisition Corp. on November 25, 2020 (the “Business Combination”). Consistent with market practice among SPACs, these Warrants had previously been accounted for as equity. In consideration of the Staff Statement, QuantumScape intends to restate its historical financial statements to account for the Warrants as liabilities. These Warrants will be marked to market with non-cash fair value adjustments recorded into earnings at the end of each reporting period. The Company preliminarily estimates that the change in accounting method will cause the liabilities on the restated QuantumScape balance sheet as of December 31, 2020 to increase by approximately $675 to $705 million, additional paid-in-capital to decrease by approximately $95 to $125 million, and non-cash non-operating expenses in the Statement of Operations for the three and twelve months ended December 31, 2020 to increase by approximately $565 to $595 million. The change in the accounting treatment of the Warrants does not change the Company’s previously disclosed non-GAAP operating metrics for the three and twelve months ended December 31, 2020. These estimates are preliminary and subject to change as management completes the restatement. Our independent registered public accounting firm has not audited or reviewed these estimates.