425: Quantum Firms Seek US Listing Amid EU Deep Tech Concerns

European quantum computing leaders IQM and Pasqal are pursuing US stock exchange listings via SPACs to secure growth capital, coinciding with EU efforts to bolster domestic deep tech investment.

Summary

• European quantum computing firms IQM and Pasqal are planning to go public on US stock exchanges through Special Purpose Acquisition Vehicles (SPACs).
• This move aims to secure significant funding for rapid development and innovation in the highly capital-intensive quantum computing sector.
• The European Commission is finalizing plans for a €3 billion ScaleUp Europe fund to prevent European deep tech firms from being acquired by foreign investors and to retain control of technological champions.
• Both IQM and Pasqal state the US listing is for growth and market access, not due to an inability to raise funds in Europe, and intend to maintain dual listings in Europe.
• The firms are also seeking US listings to gain financial leverage for potential acquisitions in an anticipated wave of industry consolidation.
• The article highlights Europe's historical challenge in providing late-stage capital for deep tech firms, leading them to seek funding in the larger US market.
• There is a concern that Europe is funding early-stage research and development only to see commercial value harvested by US markets.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this filing as neutral to slightly negative, highlighting significant challenges in European late-stage capital markets for deep tech, forcing promising companies to seek US listings, while acknowledging EU efforts to rectify this.

Positives

• IQM and Pasqal are securing significant capital for growth and innovation in the competitive quantum computing field.
• The planned US listings provide access to the world's largest public capital market, potentially enabling global expansion.
• Dual listings in Europe are planned to retain European roots and access European institutional investors.
• The EU's ScaleUp Europe fund aims to address the systemic issues of late-stage capital fragmentation in Europe.
• The US listings provide financial leverage for potential acquisitions, positioning the companies for industry consolidation.

Negatives

• European deep tech firms, including leading quantum companies, are compelled to seek capital in the US due to a perceived lack of sufficient late-stage private funding in Europe.
• There is a risk of European technological champions being acquired by foreign investors, leading to a loss of control and financial returns for Europe.
• The reliance on SPACs, while providing quick access to capital, can be controversial and subject to market volatility.
• The article suggests a systemic failure in European funding providers to adequately support deep tech champions through to commercialization.
• There is a concern that US markets may become impatient for returns from long-cycle technology, potentially leading to 'quantum winter' if share prices underperform.

Risks

• The inability of Bleichroeder or Pasqal to consummate the business combination due to shareholder approval, regulatory approvals, or redemption requests.
• Failure to realize the anticipated benefits of the business combination, potentially due to delays in consummation.
• Disruption to Pasqal's current plans and operations as a result of the business combination announcement and consummation.
• Pasqal's ability to meet expected business milestones and execute its growth strategy profitably.
• Competition on Pasqal's business and the ability to retain key employees.
• The risk associated with Pasqal pursuing an emerging technology with significant technical challenges and uncertain commercialization or market acceptance.
• Pasqal's limited operating history and financial performance.
• Potential need for additional future financing prior to or after the business combination.
• Concentration of revenue in contracts with government or state-funded entities.
• Reliance on strategic partners and other third parties.
• Risks associated with intellectual property protection, privacy, data protection, cybersecurity incidents, and related regulations.
• The use, rate of adoption, and regulation of artificial intelligence and machine learning.
• The potential for depressed share prices if quantum firms' SPAC mergers underperform, undermining investor confidence.
• The risk that public markets may lose faith if short-term returns are not met, impacting access to further funding.

Future Outlook

The filing contains numerous forward-looking statements regarding the proposed business combination between Bleichroeder Acquisition Corp. II and Pasqal, the estimated future results and benefits of the combined company, future opportunities, and the ability to consummate the transaction. It also mentions Pasqal's expectations regarding future financial performance, capital requirements, and unit economics. The article discusses the expectation of a wave of consolidation in the quantum computing sector.

Management Comments

• "It would make sure their success becomes Europes success," said the European Unions (EUs) innovation commissioner, Ekaterina Zaharieva.
• Pasqal CEO Wasiq Bokhari stated that the company has a strategy to invest abroad because the quantum computing market is international.
• Wasiq said Pasqal saw in the US an opportunity to raise money on the worlds largest public capital market and to sell computers in the worlds largest market for quantum computing, so that it could become a truly global company.
• IQM chief executive Jan Goetz said it sought dual listing so it could remain eligible for funding from institutional European investors whose rules forbid them investing in US stocks.
• Goetz stated, "Ultimately, it worked out, We were able to raise larger rounds. You find your own ways to do it in Europe. It is possible. Definitely not easy, but possible."
• Goetz also mentioned, "The lack of late-stage capital is a challenge in Europe, but the EU was beginning to fix that, as evidenced by ScaleUp Europe."
• Goetz added that a US listing would put IQM in a position of strength as it prepared for coming consolidation.
• Olivier Tonneau, a partner at Quantonation, noted, "We expect a wave of consolidation. It is the mature companies that will be the ones consolidating."
• Ion Hauer, principal at early stage deep tech venture capital firm Apex Partners, commented, "The fact that Europes two premier, unicorn-status quantum hardware champions had to use US blank-cheque companies to get the money they need to scale is an indictment of late-stage private capital in Europe."
• Sebastian Weidt, CEO of Universal Quantum, stated, "This is a failure of European funding providers of one the most critically important technologies of our generation."
• Alessandro Curioni, head of IBM Research Europe, expressed conviction that quantum computing firms would turn prototypes into commercially viable systems within the decade, preventing a 'quantum winter'.

Industry Context

StockSavvy.ai notes that the pursuit of US listings by European quantum computing firms like IQM and Pasqal highlights a critical gap in late-stage venture capital funding within the EU for deep tech companies. This trend, coupled with the EU's efforts to create the ScaleUp Europe fund, reflects a broader global competition for technological leadership and capital in emerging fields like quantum computing. The article also points to the US market's established role in providing growth capital and facilitating consolidation in high-tech sectors.

Comparison to Industry Standards

• The article contrasts the funding landscape for European quantum firms with the US market, where companies like IonQ have successfully used public listings to raise hundreds of millions of dollars for consolidation, including acquiring Oxford Ionics for $1.1 billion and SkyWater Technology for $1.8 billion.
• It mentions that two-thirds of global scaleups are in the US, compared to only a tenth in Europe, with US investors accounting for half of the world's venture capital, China nearly as much, and Europe only 5%.
• The article references the SPAC merger route taken by other US quantum computing firms such as IonQ and Rigetti, and Canada's D-Wave, noting that while these initially faced market skepticism, they have since rebounded.

Legal Proceedings

• The outcome of any legal proceedings or governmental investigations that may be instituted against the parties following the announcement of the business combination.

Stakeholder Impact

• Shareholders of Bleichroeder will vote on the proposed business combination and receive a proxy statement/prospectus.
• European investors may miss out on financial returns from the growth of European deep tech champions if they are acquired by foreign entities.
• Employees of IQM and Pasqal may benefit from increased investment and potential growth, but also face risks associated with public company scrutiny and market volatility.
• Customers of quantum computing firms may benefit from accelerated technology development and potential consolidation leading to more robust solutions.
• The EU aims to ensure that the success of European technology champions becomes Europe's success, benefiting the broader European economy.

Next Steps

• The business combination will be submitted to shareholders of Bleichroeder for their consideration.
• Bleichroeder intends to file a registration statement on Form F-4 with the SEC, which will serve as a proxy statement/prospectus.
• Upon the Registration Statement being declared effective, Bleichroeder will mail a definitive proxy statement/prospectus to its shareholders.
• Investors and security holders are advised to read the Registration Statement, proxy statement/prospectus, and other relevant documents when available.
• The ScaleUp Europe fund aims to make its first investments in the summer.
• IQM and Pasqal's flotations are expected to coincide with the ScaleUp Europe fund's initial investments.

Key Dates

Keywords

quantum computing, deep tech, SPAC, US listing, European Commission, ScaleUp Europe, IQM, Pasqal, consolidation, venture capital, capital raise, Bleichroeder Acquisition Corp. II