Key Points
Shares of Quantum Computing Inc. (NASDAQ: QUBT) were sliding today after the development-stage specialist in photonics and quantum optics technology announced a follow-on offering, raising $500 million worth of stock.
Investors sometimes dislike these additional share offerings, as they dilute existing shareholders and show that the company needs a new round of cash.
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As of 11:30 a.m. ET, the stock was down 14.4% on the news.
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Quantum Computing raises cash
In a press release yesterday, QCI, as the company is also known, said it would sell 26,867,276 shares of common stock in a private placement that was oversubscribed, indicating that demand for new shares exceeded supply.
The offering is set to generate $500 million in gross proceeds before offering expenses, and closes on Sept. 24. The company intends to use the funds to “accelerate commercialization efforts, strategic acquisitions, expand sales, and engineering personnel, working capital, and general corporate purposes.”
What it means for QCI
The fundraise isn’t a negative thing for the quantum stock, and such a move is typical for early-stage growth stocks. It also makes sense for the company to tap into the additional value of its equity after the stock has gained more than 2,000% over the last year.
QCI finished the second quarter with $348.8 million in cash, and it should be well capitalized after the follow-on offering.
However, the company is on track to generate less than $1 million in revenue this year. Given that, the pullback in the stock seems reasonable, as a proper valuation of the stock is anybody’s guess at this point, and there are still high expectations baked in at a market cap of $3.2 billion.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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