Rigetti leads the way into winter as Quantum makes its first major layoff

 

On February 11, Rigetti Computing (NASDAQ: RGTI), a pioneer in hybrid quantum-classical computing systems, announced[1] that its Board of Directors has approved an updated business strategy, including revisions to its technology roadmap; in line with this strategy, the company will support its new Chief Financial Officer, Chief Technology Officer, and is implementing staff reductions to focus its organization and resources to focus on near-term strategic priorities.

 

This is another significant development for Rigetti following the alleged financial fraud, the resignation of former CEO Chad Rigetti, and the receipt of a delisting notice.

 

Rigetti Quantum Computer

 

Developing a new technology strategy map to deliver 84 quantum bit systems

 

In response, new CEO Dr. Subodh Kulkarni said, "We have acted quickly[2] to confirm key strategic priorities for the near term after I assumed the role of CEO."

 

Kulkarni said the company's revised technology roadmap will

 

Focus on delivering the expected Ankaa-1 84-qubit system in the first quarter of 2023, designed to provide denser qubit spacing, tunable couplers and expected to achieve better performance compared to Rigetti's current 80-qubit Aspen-M system.

 

Priority is given to improving the performance of the expected Ankaa-1 84-qubit system. Concentrate efforts on achieving "narrow quantum advantage," where a quantum computer can solve a practical, operationally relevant problem significantly better, faster, and cheaper than current classical solutions.

 

Specifically, after the launch of the expected Ankaa-1 84 quantum bit system, Rigetti plans to focus his efforts on improving the performance of the system with the goal of achieving at least 99% fidelity of the 2-qubit gate on the expected Ankaa-2 84 quantum bit system; if this goal is achieved, Rigetti plans to shift his focus to extending the development of the expected Lyra 336 quantum bit system.

 

Rigetti's developments over the last 10 years. rigetti states that it has 165 issued and pending patents (69 issued and 96 pending)

 

Rigetti defines "narrow quantum advantage" as the ability to solve practical problems in production workloads, improving accuracy, speed or cost.

 

The great potential and opportunity for quantum computers that meet real workload requirements

 

Rigetti's different focus on achieving quantum computing excellence

 

Rigetti's new technology roadmap

 

QPU performance goals

 

Rigetti believes that this revised business plan and technology roadmap will allow the company to focus its software application development strategy on some of the applications most likely to demonstrate the superiority of quantum bits.

 

Leadership Changes, Quarterly Layoffs

 

In conjunction with the update to its business plan, the company also announced leadership changes in the positions of Chief Financial Officer and Chief Technology Officer.

 

Jeffrey Bertelsen has more than 25 years of financial management experience, most recently as CFO, COO of CyberOptics, a developer of high-precision sensors and detection systems for the semiconductor and electronics industries.

 

Jeffrey Bertelsen will succeed Brian Sereda, Rigetti's current CFO, on February 15. "I am looking forward to joining Rigetti and working with the team during this critical phase." Bertelsen said.

 

As part of the updated business strategy, the company will also reduce its overall workforce by approximately 28% to reduce operating expenses in activities outside of these focus areas and retain available cash resources.

 

Of all of these strategic, personnel changes, Dr. Kulkarni said, "We value the contributions of all of our employees. However, we believe these actions put Rigetti in a better, more advantageous position to deliver on the promise of quantum computing."

 

What happened to Rigetti?

 

Among global quantum companies, there are some high-profile unicorns in addition to tech giants, and Rigetti was one such company prior to its IPO, having been valued at $1.5 billion. But just a few months after the IPO, Rigetti's market cap shrunk to $100 million and it even received a delisting notice from the Nasdaq Stock Market and faced delisting difficulties.

 

Rigetti's share price for almost a year, since December 2022, has been below $1 per share

 

Coincidentally, at this juncture, Rigetti first revised its technology roadmap, then announced layoffs and executive reshuffles. So what has gone wrong for the once-stellar company?

 

For starters, Rigetti seems to relish the hype, but the end result often fails to deliver on its promises.

 

To be fair, Rigetti seemed like a good company, with its own chip factory, its own programming language and cloud platform, but it was a "satellite" company.

 

Rigetti's existing quantum technology data

 

In September 2018, Rigetti Computing announced plans to build a 128-quantum-bit computer based on a new chip architecture within the next 12 months. Four years on, that goal has now not been reached. Last year, Rigetti released 40- and 80-quantum-bit chips, which is always a new progress.

 

But there is actually more than one such thing, for example, 2021 said to launch 1000 and 4000 quantum bit chips in 2024 and 2026 respectively, by May this year, and then postponed a year back.

 

Now, according to their latest roadmap, an 84-quantum-bit chip, Ankaa-2, will be available in the first quarter of 2023, and Rigetti only plans to shift its focus to expanding the development of the Lyra 336 quantum-bit system if it can achieve at least 99% fidelity of the 2-quantum-bit gate on it . Let's wait and see if Rigetti can keep its promise this time, in March 2023.

 

Second, Rigetti may actually be having operational problems. When announcing the delayed roadmap, Rigetti explained that this expected timeline and roadmap is based on several considerations.

 

1) Higher than expected spending on labor, equipment and system components, and increased costs associated with system development.

2) Market and supply chain conditions that prevented the timely availability of materials needed for the company's machines.

3) The company's available working capital at the close of the business combination was lower than expected, which limited the company's ability to absorb these increased costs and time factors.

 

This said, it leads to another disadvantage of SPACs - high redemption rates.

 

When an SPAC completes an initial public offering (IPO), the proceeds are held in a trust account until the SPAC identifies a target company to merge with, usually within one to two years of the IPO. Since the SPAC has no business operations of its own and the target company is not known at the time of the IPO, investors have the opportunity to redeem their shares prior to the corporate merger for a pro rata share of the funds in the trust account. However, if a majority of shareholders choose to exercise their redemption rights, this may significantly reduce the cash proceeds available to the merged company for its future operations. If redemption rates are unusually high, SPAC may be in danger of failing to meet its minimum cash condition.

 

SPAC Research/SPAC Alpha data show that from January to July of last year, SPAC's average monthly redemption rate ranged from 7% to 43%. However, from July through November, that range jumped to 43%-67%, with the average SPAC redemption rate averaging about 60% during those four months.

 

In the case of Rigetti, the funds in the Supernova trust account shrank severely from $345 million to $147.51 million between the signing of the merger agreement and the final listing.

 

Finally, at a time when Rigetti has received a delisting warning, the company has issued a new Investor Presentation and appointed two executives with backgrounds in the semiconductor industry, so perhaps it will really focus on technology and product launches to win back market favor. However, whether this can be achieved depends on whether the 84-quantum-bit Ankaa-2 chip will be launched properly in March this year.

 

Reference links：

[1]https://thequantuminsider.com/2023/02/11/rigetti-lays-off-28-percent-of-staff-focuses-on-narrow-quantum-advantage/

[2]https://investors.rigetti.com/static-files/fbac3801-223f-4f0f-a207-47d25084a1d7