Stock-Split Watch: Is D-Wave Quantum Next?

D-Wave Quantum (QBTS) is not expected to perform a stock split soon, as its current share price is affordable and well above delisting concerns. Instead, the pure-play quantum computing firm has raised $550 million through at-the-money equity offerings in January and June to fund its operations, reflecting its current unprofitability with a $282 million trailing 12-month net loss. Despite a significant share price increase, D-Wave reported only $22 million in trailing revenue and trades at a high 375x sales multiple, underscoring its speculative nature and the need for substantial future growth before a stock split would be warranted.

Analysis

D-Wave Quantum (QBTS) is not anticipated to execute a stock split in the near term, despite a 3,000% share price increase over the past year. Its current share price is considered affordable, negating the need for a forward split, and it remains well above the NYSE's $1 delisting threshold, precluding a reverse split. Instead, the company has opted for share dilution through at-the-money (ATM) equity offerings to raise capital.

D-Wave completed a $150 million ATM equity offering in January, followed by a $400 million offering in June, totaling $550 million in capital raised. These offerings are crucial for the pure-play quantum computing firm, which reported a significant trailing 12-month net loss of $282 million. While these offerings dilute existing shareholders, they provide essential cash flow, unlike stock splits.

The company generated only $22 million in trailing revenue and trades at a high 375 times sales multiple, indicating its early-stage, speculative nature. This valuation, while high, is not uncommon for the quantum computing sector, with competitors like Rigetti Computing (RGTI) and Quantum Computing (QUBT) trading at even higher multiples. Profitability for D-Wave and its peers is not expected until the end of the decade, if not later.

The current low revenue suggests limited demand for D-Wave's technology, implying that substantial growth and major developments are required before a stock split would be a consideration. The overall sentiment towards QBTS is cautious, reflecting its significant losses and speculative investment profile.

Key Decisions for Investors

• Investors should closely monitor D-Wave's continued reliance on equity offerings, totaling $550 million recently, as ongoing dilution impacts per-share value and capital structure.
• Recognize QBTS as a highly speculative investment given its significant trailing 12-month net loss of $282 million and a 375x sales multiple on only $22 million in revenue.
• Focus investment thesis on the long-term potential of quantum computing and D-Wave's technology adoption, as profitability is not expected until the end of the decade.