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D-Wave stock suffered a sell-off after the company announced that it was executing all of its public warrants.
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When holders move to exercise their warrants in exchange for stock, it will have a dilutive impact on current shareholders.
D-Wave Quantum (NYSE: QBTS) stock got hit with big sell-offs over the last week of trading after the company announced financial restructuring moves. The quantum computing specialist’s share price closed out the stretch down 14.8% despite a gain of 1.9% for the S&P 500 and a gain of 2.3% for the Nasdaq Composite.
On Oct. 20, D-Wave announced that it was moving forward with the redemption of outstanding stock warrants — a move that sent the company’s share price tumbling. Despite a relatively large pullback over the last week of trading, the company’s stock is still up roughly 289% this year.
D-Wave’s announcement that it was redeeming all of its public warrants prompted substantial sell-offs for the stock across Monday, Tuesday, and Wednesday’s trading. While shares did see some significant recovery later in the week, the company’s share price closed out the week deeply in the red.
The company redeemed approximately five million outstanding stock warrants and stated that it expected the warrants to cease trading on the New York Stock Exchange on Nov. 17. The news prompted waves of selling because the redemption of the warrants could result in new shares being issued when holders move to exercise their warrants. The company said that it expected stock dilution of less than 2.1% for existing shareholders in the event that all outstanding warrants are exercised.
Thanks to excitement surrounding technology breakthroughs and potential applications in artificial intelligence (AI) and other technology fields, excitement surrounding D-Wave and other quantum computing stocks has been red hot. As a result, quantum companies are currently commanding extremely growth-dependent valuations.
As of this writing, D-Wave is valued at approximately 455 times this year’s expected sales. Investors will get a closer look at the company’s performance and new tech initiatives when the quantum specialist reports its third-quarter earnings on Nov. 6.
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