Quantum Computing Tumbles 16%. What Is Sending the Stock Lower.

Quantum Computing stock fell after the company announced a $500 million oversubscribed private placement. (Dreamstime)

Key Points

About This Summary

• Quantum Computing falls after announcing a $500 million private placement to fund commercialization and acquisitions.
• The offering, expected to close Sept. 24, will bring Quantum Computing’s total cash position to $850 million.
• Despite past fraud allegations and sector-wide losses, the offering was oversubscribed, signaling investor confidence.

Shares of Quantum Computing sank Monday after the company announced a $500 million private placement to fund its future growth.

The Hoboken, N.J.-based company said it plans to issue nearly 26.9 million shares to several large existing shareholders, in addition to a first-time investment from a global alternative asset manager. The offering is expected to close on Sept. 24, bringing the company’s total cash position to $850 million.

Net proceeds will support commercialization efforts, strategic acquisitions, and other growth initiatives, the company said. CEO Yuping Huang asserted that the latest of four offerings would help the company make headway on its “multi-year growth plan.”

The announcement sent shares down 16% on Monday to $19.45. Quantum Computing stock has surged more than 3000% over the past 12 months, with a three-year beta of 1.83 that makes it nearly twice as volatile as the broader market. While a double-digit percentage drop could be monumental for larger, more stable players like International Business Machines , it could amount to nothing more than a blip for Quantum Computing.

Quantum Computing noted that the offering is oversubscribed, meaning demand exceeds the number of securities available for sale. Crucially, this disclosure signals that market confidence remains unshaken in the face of Quantum Computing’s various challenges.

The company has been the subject of extensive scrutiny in the past. In January, short seller Capybara Research accused Quantum Computing of “fabricating revenue” and “misrepresenting its products.” This came just months after a different short seller, Iceberg Research, published its second report on the company, alleging fraud. Quantum Computing did not respond to a request for comment regarding the claims and hasn’t addressed them publicly to date.

Then there are the woes that befall all quantum computing companies. To date, none of the dedicated pure plays have turned a profit. Many players post lumpy revenue, occurring in large chunks at irregular times, which makes it difficult for investors to gauge their health and progress.

Quantum Computing has an inherently different goal than peers, with a focus on processing the components of photonic chips used in communication technology. The company has frequently touted its ties to NASA and unveiled its own chip foundry earlier this year.

While downsides come with a private placement, notably dilution concerns, the fact that the offering is oversubscribed is a sign that investors are confident about the company’s longer-term prospects. The latest offering comes just months after Quantum Computing completed a $200 million private placement.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com