In the latest setback for quantum technology companies that recently listed on major stock exchanges, the Globe and Mail is reporting that D-Wave, a quantum computing pioneer based in Canada, may be facing a cash crunch just six months after going public.
The company, which has raised over $350 million from investors and received millions in aid from the Canadian government, has spent almost a quarter century years developing quantum computers. Despite revenue from 63 clients, including huge customers such as Mastercard, Deloitte, and Save-On-Foods, D-Wave is not producing significant revenue to cover expenses, according to the Globe and Mail.
Experts speculate the setbacks across quantum may mean that quantum tech startups may have went public too early, or that they simply fell victim to terrible timing by listing during one of the toughest economic period that included soaring inflation and tighter monetary policies. D-Wave also faces stiff competition with companies developing machines that could surpass D-Wave’s capabilities.
“There’s going to be a rush to the exits by some and who knows what happens to the price then,” said former D-Wave director Michael Brown, told the Globe and Mail.
D-Wave’s key funding source is a line of credit with Lincoln Park Capital Fund, which permits the company to draw up to $150 million in exchange for the issuance of shares. However, there are limitations to this funding source, as D-Wave can only access a limited amount of cash daily and Lincoln Park can only own up to 9.9% of the company. Additionally, if the stock falls below $1 per share, D-Wave is prohibited from using the credit line. With shares closing at $1.58 on Friday, it remains unclear how many unlocked investors might sell and what impact this could have on the stock price.
The Canadian government has already shown a keen interest on D-Wave’s continued contributions to the nation’s robust quantum potential. The government bolstered D-Wave with a $40 million investment in 2021 and the company plays heavily in the country’s quantum strategy, the paper reported.