IonQ, a Maryland-based quantum computing start-up working with ion trap technology, plans to go public via a Special Purpose Acquisition Company (SPAC) merger according to a report in today’s Wall Street Journal. The deal would value IonQ at $2 billion and make it the first pure-play quantum computing company to go public.

SPACs aren’t new but have recently become more popular. In this deal IonQ would merge with the ‘blank check’ firm dMY Technology Group. Here’s a quick description of the SPAC methodology from Investopedia:

“SPACs are generally formed by investors, or sponsors, with expertise in a particular industry or business sector, with the intention of pursuing deals in that area. In creating a SPAC, the founders sometimes have at least one acquisition target in mind, but they don’t identify that target to avoid extensive disclosures during the IPO process. (This is why they are called “blank check companies.” IPO investors have no idea what company they ultimately will be investing in.) SPACs seek underwriters and institutional investors before offering shares to the public.

“The money SPACs raise in an IPO is placed in an interest-bearing trust account. These funds cannot be disbursed except to complete an acquisition or to return the money to investors if the SPAC is liquidated. A SPAC generally has two years to complete a deal or face liquidation. In some cases, some of the interest earned from the trust can be used as the SPAC’s working capital. After an acquisition, a SPAC is usually listed on one of the major stock exchanges.”

The WSJ reported: IonQ “intends to file paperwork in about a week with the Securities and Exchange Commission to go public on the New York Stock Exchange through a special-purpose acquisition company deal valuing the combined entity at about $2 billion. The deal will need approval from the SEC and SPAC shareholders.

“If the deal goes through, IonQ will have raised $734 million in funding since its founding in 2015, including $300 million through its planned merger with dMY Technology III and another $350 million in private investment funding from Hyundai Motor Co.; Breakthrough Energy Ventures, an investment organization led by Bill Gates and focused on mitigating the effects of climate change; and others. The company also has raised $84 million in venture-capital funding.

“The money raised from the transaction will be used to help IonQ manufacture a quantum-computing machine that works at room temperature and is about the size of an Xbox videogame console, Mr. Chapman said. That would be significantly smaller than early-stage machines on the market today, without requiring the supercooling necessary to achieve quantum mechanical effects.”

Quantum information sciences, including quantum computing, has abruptly become hot after years of lukewarm percolation with accelerated government and commercial investment. Among the many different qubit technologies being developed (superconducting, spin, cold atom, photonic, etc.) ion trap has shown potential advantages because of its stability and potential use at higher temperatures. IonQ has said it will have a completed device in 2023. Other companies such as IBM, Rigetti, D-Wave, and Honeywell all have systems up and running now, although those systems are still most accurately described as research machines and not production systems.

It will be interesting to see if other quantum start-ups also go the SPAC route.

Here is dMY’s self-description from an earlier press release (Nov. 2020): “dMY Technology Group III is a blank check company whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. While the Company may pursue an initial business combination target in any industry or geographic region, the Company intends to focus its search for an initial business combination on companies within the broader consumer technology ecosystem that are either consumer-facing or support the infrastructure of consumer applications (“apps”) with enterprise valuations in an approximate valuation range of $1.0 billion to $3.0 billion, though the Company’s search may span consumer software segments worldwide and may pursue a target outside its expected range. The Company intends to specifically focus on companies that have created, or enabled the creation of, compelling mobile app experiences with significant growth in segments such as gaming, entertainment, work productivity, e-commerce, dating, financial technology, and health and wellness. Companies developing disruptive and key enablement technologies for consumer-facing apps in these segments, such as artificial intelligence (“AI”), machine learning (“ML”), cloud infrastructures and quantum computing are also within the scope of this search.”

Link to Wall Street Journal article by Sara Castellanos, https://www.wsj.com/articles/quantum-computing-startup-ionq-plans-public-debut-in-2-billion-spac-merger-11615201201?mod=hp_lista_pos5