Key Points
Private equity firm Heights Capital Management will buy 20.5 million shares of IonQ stock for $40 a share.
Which is weird because IonQ stock currently costs less than $32!
It's a great deal for IonQ. For the investor, not so much.
IonQ (NYSE:IONQ) stock tumbled 9% through 1 p.m. ET on Wednesday -- and it's got only itself to blame.
Just before shares opened for trading this morning, IonQ announced it will raise $2 billion in cash by issuing and selling warrants and new shares of stock.
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IonQ's big cash grab
Specifically, IonQ plans to sell 20.5 million shares of common stock for $40 each; plus 29.5 million "pre-funded warrants" to buy stock -- also for $40 each -- plus 100 million warrants to purchase IonQ stock, exercisable at $69.46 per share at any time in the next seven years.
One single investor, Heights Capital Management, Inc. -- which, according to data from S&P Global Market Intelligence, is a private equity firm owned by global quantitative trading company Susquehanna International Group -- will buy all of the above securities for $2 billion.
What it means for IonQ -- and You
It's pretty clear what's in this for IonQ: Although valued at nearly $14 billion, the quantum computing company has less than $250 million in annual revenue, is losing $1.4 billion a year, and, according to pretty much every analyst who follows the company, is still at least a half decade away from earning any profit whatsoever.
With $2.1 billion in cash reserves, IonQ is expected to burn more than $640 million in cash this year -- then $2 billion more over the next three years, emptying its bank account entirely. Raising $2 billion now is the smart move, heading off a cash crisis before it happens.
What's less clear is why Heights Capital Management is willingly paying $40 a share for a stock it could easily buy for under $32 today. That seems like a bad deal to me, for this investor... and for any investor.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends IonQ. The Motley Fool has a disclosure policy.