Since the close of trading at the end of last week, shares of Quantum Computing (QUBT 3.04%) traded roughly 9% lower as of 11:10 a.m. ET Friday. The big move came earlier this week after the company announced an oversubscribed private placement.
Balancing dilution concerns with excitement
On Sunday, Quantum Computing announced a $500 million oversubscribed private placement of common stock. The company will sell over 26.8 million shares to large existing shareholders, as well as a new investment from a large global alternative-asset manager.
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Quantum Computing will use the money to continue its pursuit of commercializing quantum computers. The company will also use the funds for potential acquisitions, to grow its sales and engineering teams, for working capital, and other general corporate purposes.
CEO Yuping Huang said, "This successful $500 million offering, led by strong support from both new and existing leading institutional investors, is priced at a substantial premium to our four recent offerings, bringing our total gross capital raised since November 2024 to approximately $900 million."
Private placements can be both good and bad. The bad news here is that common shareholders are looking at dilution. The good news: There was strong demand from institutional investors, also known as the smart money.
Is the stock a buy?
Quantum Computing's stock is up more than 3,000% over the past year and now trades at a $3.9 billion market cap. However, the company made only $100,000 in revenue through the first half of the year and is losing money.
While investors are obviously banking on the future, this doesn't leave much room for error. If the company's products don't work out as expected, the stock could drop hard, which is why I would either avoid the stock or invest only a small amount that you are OK with potentially losing.
