Sisyphus Capital

Jack Norman Hansen – December 17, 2024 

2024 has been deemed the “everything bubble” year. Nearly all asset classes have seen significant appreciation, with one notable exception being US Treasuries. One notable example of this is Quantum Computing Inc., ticker QUBT. At market close of Tuesday, December 17th, the stock closed at 16.79. This means Quantum Computing has seen a return of roughly 2500% in the past 6 months. That’s also a return of 450% in the past month.  This tremendous return has been driven by hype around quantum computing, with Google’s Willow chip being able to calculate difficult equations at breakneck speeds. However, Quantum Computing Inc. possesses traits more analogous to a pump-and-dump scheme than a firm that develops innovative quantum computing solutions. I believe that QCI is trading significantly above even the most generous speculative multiples that warrant a purchase of stock. This recent rally on news is indicative of a bubble that will correct once investors blow away the smoke and mirrors

Quantum Computing Inc.’s History

Quantum Computing Inc was founded in Nevada in 2001, under the name Ticketcart, Inc.. The company changed its name to Innovative Beverage Holdings Inc. in 2009, and redomiciled to Delaware in 2018, changing their name to Quantum Computing Inc. This means that QCI is new to the industry and was unlikely to be well positioned due to the dissimilarity of the two industries. QCI merged with QPhoton, a quantum computing company in 2022 to help with it’s legitimacy and acquire new technology, but this merger resulted in lawsuits over the creation of $8 million in debt.

Quantum Computing Inc.’s Financials

QCI has only generated revenues since 2022. Since this period, they have generated a net revenue of $880.5 thousand, and gross profit of $325.41 thousand. Their operating income has remained relatively stagnant, hovering around -$26 million and oscillating slightly. This lack of meaningful revenue and total lack of income depicts a company that is not selling anything. Their total assets in the latest quarter were $76.81 million, meaning their asset turnover ratio on $110 thousand dollars of revenue equates to 0.0014. Diluted average shares has quadrupled since the beginning of 2021, implying that the firm’s leadership does not care about shareholders at all: why dilute the shares without generating any revenue, other than to generate capital at the detriment of current shareholders? In tandem with this, QCI paid out stock-based compensation to the tune of $24.25 million since 2022. Based solely on the fundamentals, this is extremely overvalued. Furthermore, QCI has accumulated a $149.2 million deficit. They have not demonstrated any reasonable attempts to address this, sale of stock has been contributing to the majority of the operating cash. Debt is another method the company has utilized.

Quantum Computing Inc.’s Deal With NASA

Quantum Computing Inc. announced a deal with NASA on the 17^th of December. This deal generated an increase of market capitulation by 51.35% in a single day. The financial details of the deal? Not mentioned anywhere in the press release. However, further research finds that NASA awarded a $26,163 contract to QCI, with an end date of September 30^th, 2025. I personally am of the belief that twenty-six thousand dollars should not warrant a multi hundred million dollar increase in a company’s market cap, regardless of who the contract is with. While a contract with NASA is impressive, the small size of the contract is less than a hundredth of a percent of their annual budget. This deal would represent a sizable portion of revenue for QCI. However, it is still far to small to warrant the immense growth in QCI stock price resulting from its announcement.

Many other names within the space such as IonQ are securing multimillion dollar deals. The companies are not beset with a nebulous corporate history, and have demonstrated significantly more proof of work. I am very bearish on QCI’s outlook; utilizing investor hype and piggybacking on general market mania combined with delusional growth. It is of my opinion that the stock will depreciate as more news about the deal surfaces. When investors who have profited on this bull run cash out, the stock price will plummet to values appropriate for a company that has yet to earn a million dollars revenue in a year.