I've Got a Quantum Computing Small-Cap Swap Idea
Let's run the calculations on how to trade Quantum Computing and D-Wave shares.
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I wrote to you only about two weeks ago about the quantum computing stocks that I was trading. I am still long both Quantum Computing Inc QUBT and D-Wave Quantum QBTS and have added on some dips to both. I am up 157% in QUBT and up 152% in QBTS since writing that article. I imagine that readers who joined the fun when I wrote that article are probably also up three digits in percentage terms and may even be outperforming your author if they just sat in the stocks without playing around at all.
D-Wave News You May Not Know...
On Friday, Sector Pension Investme Public sold a million shares of D-Wave at an average price of $6.68 for proceeds of $6.68 million, which was disclosed in a filing with the Securities and Exchange Commission. Major shareholders, as Sector Pension Investme Public must be, who hold a more than 10% stake in a public corporation, are required by law to disclose such transactions. Looking back not too far, we also see that this same investor, on Dec. 12, sold more than 8.4 million shares of D-Wave at an average price of $4.21, creating proceeds of more than $35.3 million. Going a little further back, on Dec. 10, this investor sold more than 643,000 shares at an average price of $4.87, raising more than $3.1 million.
On Tuesday afternoon, news broke that D-Wave Computing had filed for a $125 million mixed shelf. This is not an offering to sell securities to the public, but is a prospectus that sets up the sale of up to $125 million worth of common stock, preferred stock or debt securities or both that may be issued in more than one series and not all at the same time. A prospectus supplement will be provided once a decision is made to offer securities under this filing. What this is, is a time saving, red tape reducing move so that the company can quickly raise cash when it thinks the time is right. With these stocks running as they have of late, this move is prudent. That said, it does potentially imply some dilution of equity going forward.
Fundamentals, Cash and Burn
The company, as of the end of the September quarter, had $29.3 million in cash on the books and current assets of $35.1 million. Current liabilities added up to just $25.8 million, but $14.1 million of that was in debt maturing within 12 months. The company also had an additional $32 million in longer-term debt. Problem? Well, the company has generated an operating cash loss of $18.1 million for the most recent quarter, and $59.4 million for the most recent trailing 12-month period reported. That's a significant cash burn relative to the firm's cash position and near-term obligations.
A Rough Wave?
For the current quarter, D-Wave is expected to show a revenue contraction of 23.6%, and really almost no growth at all for the full current year. For fiscal '25, the firm is projected to grow revenue a rough 69%. By contrast, my other name, Quantum Computing (QUBT) is expected to grow revenue 167% for the current quarter, 40% for the full year and 200% next year.
My Plan
QBTS is up a little this morning, despite the shelf registration and the recent sales made by one of the company's large investors. QUBT is, in my opinion, clearly a stock of somewhat higher quality. My plan is to take my 157% profit in QBTS and put that capital into QUBT for now. I will try to buy 2.13 shares of QUBT for every one share of QBTS sold to try to keep the swap dollar neutral.
Ultimately, should this news catch up to QBTS and the stock sells off, on a day that QUBT does not, or does not sell off as severely, I will start piecing a portion of my QUBT back into QBTS. This sounds a little complicated. but really is not. The risk is that QBTS continues to trade higher, but QUBT sells off. Then I will have outsmarted myself.
At the time of publication, Guilfoyle was long QBTS, QUBT equity.
