D-Wave to Go Public with SPAC Deal; Expects ~$1.6B Market Valuation

By John Russell

February 8, 2022

Quantum computing pioneer D-Wave today announced plans to go public via a SPAC (special purpose acquisition company) mechanism. D-Wave will merge with DPCM Capital in a transaction expected to produce $340 million in cash and result in a roughly $1.6 billion initial market valuation. The deal is expected to be completed in the second quarter of 2022 and the new company will be traded on the New York Stock Exchange under the symbol QBTS.

There are, of course, many large, well-funded, public companies pursuing quantum computing and quantum information science generally. IBM, Intel, and Google are just three notables. Lately, it seems some of quantum computing’s start-ups have started seeking to go public via the SPAC mechanism to raise both funds and exposure (analyst coverage). The SPAC approach skirts many of the rigors and costs associated with a typical IPO (primer from Wharton (UPenn) on Why SPACs Are Booming[i]).

The D-Wave quantum annealer at its new location in the JUNIQ building at Forschungszentrum Jülich. Credit:
Forschungszentrum Jülich / Sascha Kreklau

D-Wave is just the most recent among a handful of quantum computing companies to choose the SPAC approach. IonQ used a SPAC to go public in October, Rigetti Computing announced SPAC plans at roughly the same time, while Quantum Computing Inc. went public in July.

Quantum watcher Paul Smith-Goodson of Moor Insights and Strategy, said “I wouldn’t be surprised to see a few more quantum companies choosing the SPAC route this year. It is a faster and easy way to raise large amounts of funding that are needed for more research and use cases. Although quantum computing has made a great deal of progress in the last five years, it still remains a prototype technology. Quantum computing has at least another five or more years before we see wholesale commercialization of it.”

Funding is nearly always an issue for the newcomers, and, as Smith-Goodson noted, there are still significant technical challenges to be solved, notably error correction and high qubit fidelity.

Founded in 1999, D-Wave is hardly new, but like all pure-play quantum companies it is literally trying to create a new industry around quantum computing. The process isn’t cheap, and the intensifying global race to achieve practical quantum computing has fired up competition and driven funding efforts to accelerate R&D and commercialization. D-Wave – best known for its quantum annealing technology (think analog computing) – recently expanded into gate-based, universal quantum computing, which many believe holds greater potential to transform much of computing for select applications. (See HPCwire coverage, D-Wave Embraces Gate-Based Quantum Computing; Charts Path Forward)

Alan Baratz, D-Wave

In the official announcement, D-Wave CEO Alan Baratz, said “Today marks an inflection point signaling that quantum computing has moved beyond just theory and government-funded research to deliver commercial quantum solutions for business. D-Wave, along with DPCM Capital and our new and long-term investors PSP Investments, Goldman Sachs Asset Management (Goldman Sachs), NEC Corporation, Yorkville Advisors, and Aegis Group Partners, collectively believe that this isn’t a moment of hope or science. Instead, we believe this event represents a moment of practical value creation for customers and for investors.

“We are working with our customers to identify applications with high likelihood of quantum value and to translate those problems to run on the quantum computer and then validate that value. We expect this ‘value creation and validation’ to accelerate as an increasing number of diverse use cases emerge—creating a robust cycle of product delivery, application development, and market growth,” said Baratz.

D-Wave has a clearly buoyant view of quantum’s nearer-term future. It’s foundation, at least for now, is quantum annealing technology which has shown strength in solving a variety of optimization problems. D-Wave is one of a few companies to sell standalone quantum computing systems in addition to providing web-based access and tools.

Here’s list of progress points and plans being cited by D-Wave:

  • “D-Wave’s customers include 25 of the Forbes Global 2000, and work in diverse industries such as logistics, materials sciences, drug discovery, financial modeling, and more. Think: Volkswagen, BBVA, DENSO, Accenture, Save-on-Foods etc.
  • “Proceeds from the transaction will be used to further accelerate its delivery of in-production quantum applications for blue-chip customers and to build on the 200+ U.S. patents that have been granted to D-Wave since its founding in 1999.
  • “D-Wave’s R&D focus will be on the next generations of annealing quantum computers, advancing its gate-model program, and continuing to enhance Leap (D-Wave’s quantum cloud service).
  • “D-Wave expects to continue to grow its global footprint beyond the United States, Canada, Europe, Japan, Singapore, and Australia to other emerging markets for quantum computing.”

Adding gate-based quantum computing, which most observers think has broader applicability and a bigger payoff versus classical computers, is a natural next step, says the company. D-wave says that much of its underlying control systems expertise and quantum superconducting chip expertise is transferrable.

Smith-Goodson struck a cautious note, “D-Wave’s expertise is in quantum annealing. That is much different than gate-based quantum computers which are the ones that will solve the world’s big problems like climate change, new pharmaceuticals, and simulation of large chemicals.

“Even though D-wave has plans to build a gate-based superconducting quantum computer with the new funds, it will still be years behind companies like IonQ, Quantinuum, Atom Computing, and IBM with its massive network of superconducting quantum computers.”

The newly-combined company will continue to operate from D-Wave’s R&D and head office location in British Columbia, Canada.

Link to announcement: https://www.hpcwire.com/off-the-wire/d-wave-to-go-public-via-transaction-with-dpcm-capital/

Header image: D-Wave quantum processors

[i] Excerpt from Wharton SPAC Report:

“SPACs, or special purpose acquisition companies, have raised more than $100 billion so far this year compared to $83 billion last year and more than all that they have raised in their 30-year history…

“A SPAC is a publicly listed shell company that is created to merge with a private operating company. The merger creates a single entity that will trade publicly and thus give a public listing for the private operating company. When SPACs raise their initial capital, they are not required to identify the operating companies they plan to buy; the SPAC’s selling proposition is based on the reputation of its sponsors, [Itamar] Drechsler pointed out.

“From the time a SPAC lists and raises money through an IPO, it has 18 to 24 months to find a private operating company to merge with. If a SPAC can’t find an acquisition target in the given time, it liquidates and returns the IPO proceeds to investors, who could be private equity funds or the general public. SPACs usually find those target companies, Drechsler noted.”

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