Why Quantum Computing Stock Popped, Then Dropped

Key Points

• Quantum Computing raised $500 million in new cash from a private stock offering this week.

• The quantum computing stock says it now has $850 million in the bank.

• Annual cash burn today is less than $10 million.

• 10 stocks we like better than Quantum Computing ›

Shares of eponymous quantum computing company Quantum Computing Inc. (NASDAQ: QUBT), also known as QCi, soared more than 13% in early trading Friday before turning tail and giving up nearly all their gains.

As of 11 a.m. ET, QCi stock is still up 2%.

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Why investors love Quantum Computing stock

What's behind the run-up? On Wednesday, QCi announced its offer for $500 million in new stock for private investors was "oversubscribed" -- meaning there was more demand to buy shares than there were shares available to buy. "Several large existing shareholders" participated in the stock offering, alongside one new "preeminent global alternative asset manager."

The shares sold for an average price of $18.61 per share. The same shares today cost... more than $21.

Is Quantum Computing stock a buy?

So private investors in QCi got a pretty sweet deal, a 13% gain -- not bad for two days' work. But what about everyone else invested in QCi?

Well, they're going to have to eat a bit of stock dilution, I fear. QCi says it issued 26.9 million new shares in the offering, and that's going to lift its share count from 186.8 million to 213.7 million -- about 14.4% stock dilution. This means that if QCi ever becomes profitable in the future, current investors will have 14.4% less of a claim on those profits.

That's not an immediate concern, however, as no analysts following the company currently predict QCi stock turning profitable... ever.

The good news is that with the new cash from this offering, QCi's bank account is now overflowing with $850 million. Even with cash burn predicted to more than double to $17 million next year, that should be enough cash to keep QCi in business for years -- or even decades.

Should you invest $1,000 in Quantum Computing right now?

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Rich Smith 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.