D-Wave Will Go Public with a SPAC Transaction and an Estimated Market Cap of $1.6 Billion

D-Wave will merge with DPCM Capital, a Special Purpose Acquisition Company (SPAC), in a transaction that will have a pro-forma implied market capitalization of the combined company of about $1.6 billion USD. The pre-money valuation of D-Wave will be $1.2 billion. The transaction is similar to those that have been announced with IonQ and Rigetti, but it does include a few twists. Like the other transactions, D-Wave will receive an infusion of cash of about $340 million. This will come from the $300 million of cash in DPCM existing trust with an additional $40 million in a PIPE (Private Investment in Public Equity) transaction from a group of strategic and institutional investors. D-Wave was founded in 1999 and the transaction is expected to complete in Q2 of 2022 making it about 23 years from its founding to going public.

Like the other SPAC transactions, D-Wave and DPCM believe that this cash will be all that D-Wave will need until they turn cash flow positive in 2025. A common concern with SPAC transactions is that previous shareholders of the SPAC will redeem their share when the merger happens. To incentivize shareholders to hold on to their shares, the company has created a bonus pool of 5 million shares that will be given to those shareholders who do not redeem, which will effectively lower the cost basis for their shares.

As part of their investor presentation, D-Wave presented a financial forecast that shows forecasted 2022 revenue of $11 million rising to a forecasted revenue of $551 million in 2026. They indicated that currently the revenue comes from providing a Platform as a Service (PaaS), i.e. their Leap platform, and Professional Services revenue for application development and consulting. In 2022, the revenue split between the two is about 50-50, but their expectation is that in the ensuing years more applications will go into production and the PaaS component will rise and represent over 90% of their revenue in the outer years. The also expect becoming positive in both EBITDA and cash flow by 2025.

In their investor presentation D-Wave emphasized that they are the only company that is pursuing both quantum annealing and gate-based quantum computers. In addition, they repeated their belief that annealers will always be the best approach for addressing optimization problems. This could be significant because they indicated that optimization could take 25% of the total quantum computing market and since they are the only ones currently offering an annealer solution, they would capture a large portion of this optimization TAM.

There are several documents available for those who want more information about this transaction. A press release announcing the merger is available on the D-Wave website here, a video of the investor presentation is located on YouTube here, the slides from the investor presentation can be found here, and the SEC website page for DPCM containing the financial filings including the proxy, prospectus and the 8-K report is available here.

February 8, 2022