Quantum of solace: Rigetti to cut workforce as it faces Nasdaq delisting

Appoints new CFO, CTO, chops 1 in 4 staffers

Quantum startup Rigetti is to shed about 28 percent of the workforce as part of an updated business plan that includes revising its technology roadmap and focusing on nearer-term strategic priorities. The move follows earlier warnings that the company was in danger of being delisted from the Nasdaq stock exchange due to a slump in its stock price.

Rigetti announced on February 10 that its Board had approved an updated business plan that would see it switch to a newly appointed CFO and CTO and work on delivering the 84-qubit Ankaa-1 system currently under development before the end of Q1 2023.

The company said that its new blueprint will also see it reduce overall staffing levels by approximately 28 percent, in order to preserve available cash resources and lower operating expenses resulting from activities outside of its newly identified focus areas.

An updated Investor Presentation with a revised technology roadmap was published on Rigetti's website, and the company warned that its previously announced roadmap "should no longer be referred to or relied upon."

Some industry watchers fear that moves such as this could mark the beginning of a "quantum winter," named after the so-called AI winter where development of artificial intelligence stalled for a long time and investors stayed away through frustration with the lack of progress.

Rigetti stock has publicly traded on the Nasdaq stock market since March last year, following the completion of a merger with Supernova Partners Acquisition Company II, a special purpose acquisition company (SPAC), in a deal said to be worth $1.5 billion.

Other quantum computing outfits that have followed the SPAC route to getting listed on the stock market include D-Wave and IonQ

Warning letter

However, in a FORM 8-K filing with the US Securities Exchange Commission (SEC), Rigetti disclosed that it had received a letter on January 25 from Nasdaq notifying the company it was not in compliance with listing rules which require it to maintain a minimum bid price of $1.00 per share.

This puts Rigetti at risk of eventually being delisted from the exchange, unless it can regain compliance. The business said it intends to actively monitor the price of its common stock and consider the available options to regain compliance with the Bid Price Rule, including potentially seeking to effect a reverse stock split.

Dr Subodh Kulkarni, who was appointed CEO of the company in December, announced that Rigetti will gain a new Chief Financial Officer with Jeffrey Bertelsen replacing Brian Sereda as of February 15, and also that David Rivas has been promoted to Chief Technology Officer, replacing Mike Harburn.

Ankaa-1's away...

Kulkarni said the company's revised technology roadmap will center on delivery of the Ankaa-1 84-qubit system, which is expected to provide denser qubit spacing and better performance compared to Rigetti's current 80-qubit Aspen-M system.

Rigetti will also prioritize increasing the performance of Ankaa-1 once launched, and focus on efforts to demonstrate a narrow quantum advantage, which is the point at which a quantum computer is able to solve a problem significantly better, faster, or cheaper than classical systems.

"Rigetti plans to focus its efforts on improving the performance of the system with the goal of reaching at least 99 percent 2-qubit gate fidelity on the anticipated Ankaa-2 84-qubit system, and if this target is achieved, Rigetti plans to shift its focus to scaling to develop the anticipated Lyra 336-qubit system," Kulkarni said.

These strategic and organizational changes are due to be discussed during Rigetti's earnings call for Q4 and full year 2022, which is scheduled for March. Previous results for the third quarter ended September 30 last year, recorded revenue of $2.8 million, down from $2.9 million in the same period a year earlier, and an EBITDA loss of $14.8 million.

However, Kulkarni said: "We believe these actions put Rigetti in a better position to deliver on the promise of quantum computing and are aligned with the company's refocus on nearer-term priorities."

With quantum computers not expected to deliver the required level of reliability until perhaps the end of the decade, there has been speculation whether startups in particular would be able to keep on attracting the funding required to get them there.

"Quantum is a peak hype segment and is likely to remain so for the foreseeable future," Gartner VP analyst for Quantum Technologies, AI Infrastructures, and Supercomputing Chirag Dekate told us.

"The quantum segment is also highly fragmented with an estimated 600+ startups and some established companies currently operating in the space. This level of market activity is unusual and unsustainable for a market segment that currently does not deliver business value," he added.

While publicly listed companies such as Rigetti are more prone to scrutiny, they are but the tip of the iceberg, according to Dekate.

"We anticipate a higher propensity for negative churn in the quantum ecosystem in the near term. A significant majority of quantum startups have negative cashflow and are likely to remain so in the near term. There is a higher likelihood of more than one in two quantum startups either collapsing or being part of M&A activity at lower valuations by end of 2024," he forecast.

Peaks and crests are a natural part of a healthy industry, and the quantum industry is no different, Dekate said, but added "we might be seeing the first signs of a quantum winter." ®