Quantum Startups’ Stock Market Dreams Are Decohering

At the end of September, Rigetti reported $212 million in assets and a net loss of $49 million for the year to date. The SPAC deal was originally expected to net $458 million, pushing Rigetti’s valuation to about $1.5 billion, but after some investors pulled out it raised not much over half the expected amount.

Quantum computing is a particularly precarious investment field. The technology, meant to accelerate computer processing by harnessing quantum mechanics to solve complex problems, will likely not be widely useful for years. Standards in pricing and business practices have yet to be solidified. And although companies such as Volkswagen are experimenting with quantum computing, products and demand are not yet well-established.

“In some sense, SPACs are ideal for a company that has huge potential but is going to take some time to mature,” D-Wave CEO Alan Baratz told Fast Company about its merger in August 2022. “With a SPAC, you’re able to tap into the funding sources in the public markets to accelerate your growth and do it based on the future potential.” As of late September, D-Wave reported $39 million in assets and nearly the same in net losses for the first nine months of 2022, but the company has signed a deal with a capital fund to provide an extra $150 million over three years. The company did not provide a comment for this story.

Companies are standing by the SPAC paths they took, and some have significant reserves. Peter Chapman, president and CEO of IonQ, says the company merged with a SPAC to raise the “substantial” amount of capital it needed. The company reported that in September it had $556 million in cash and investments and losses of $30 million for the year to date.

“IonQ is making outstanding advancements at a time when other companies in our field are slowing down,” Chapman told WIRED in an email. The company is still hiring for dozens of positions, has worked with with Dell and GE, and has enough cash to keep moving ahead, Chapman says. “Based on our achievements to date, we continue to believe that the money we raised last year will fund IonQ for the foreseeable future.”

Quantum computing projects at giants like Alphabet and IBM can draw on revenues from their established businesses. But smaller ventures going all-in on quantum need other sources of cash to ensure their long-term survival. SPACs were an appealing money source, but some companies that tapped them may be caught up in the fallout.

“The unfortunate thing with SPACs is they allowed companies to rush to the public markets before they should’ve,” says Charles Kane, a lecturer in international finance and leadership at the Massachusetts Institute of Technology. “All SPACs aren’t bad, but a lot of them were bad because they should never have been public to begin with.”

Kane says that could spell trouble not just for those who bought stocks, but for the prospects of companies trying to develop expensive, labor-intensive technologies. “Their access to capital is more limited once they’re a public company,” says Kane. “That will impact their ability to develop further.”