Xanadu makes solid debut as it begins trading on TSX and Nasdaq

Toronto quantum computing firm Xanadu Quantum Technologies has officially gone public, and investors today have reacted favourably.

Xanadu began trading on the Toronto Stock Exchange (TSX) and Nasdaq on Friday under the ticker XNDU. The firm began trading on the Nasdaq at $10 USD per share and by market close its stock was up 15 percent, to $11.50. This is a strong gain compared to broader market turmoil—conflict in the Middle East helped drag the Nasdaq index down nearly five percent through the week ending Friday.

Xanadu’s debut on the TSX, meanwhile, makes it the first Canadian technology company to debut on the exchange since 2021. The firm’s debut also makes it the first pure-play photonic quantum computing business to go public. Xanadu achieved this by merging with Philadelphia-based special purpose acquisition company (SPAC) Crane Harbor Acquisition Corp.

“Before today, you couldn’t invest in [the] photonics modality, so we’re excited to bring that to public markets.”
Christian Weedbrook,
Xanadu

“It’s been fun this morning,” Xanadu founder and CEO Christian Weedbrook told BetaKit shortly after trading opened on Friday. With the SPAC process complete, he said it’s now time to “get back to work.”

As Weedbrook told BetaKit last month, he hopes that his company and fellow Canadian deep tech firm General Fusion—which struck its own SPAC deal in January—mark the start of a new trend that reverses the Canadian tech initial public offering (IPO) drought.

“Canada has played an outsized role in building the quantum era, and Xanadu’s debut marks an important step in connecting that leadership to global capital markets,” Quantum Industry Canada CEO Lisa Lambert told BetaKit over email. “It’s a strong reflection of both the company’s leadership and the world-class ecosystem behind it.”

Xanadu announced today that the SPAC transaction gives it approximately $302 million USD in gross proceeds, much lower than the up-to-$500 million USD it initially estimated when the $3.6-billion USD deal was first announced in November.

That $500-million USD figure consisted of $225 million USD from Crane Harbor’s trust account (assuming no redemptions by the SPAC’s public stockholders) and $275 million from AMD, the asset management arms of BMO and CIBC, Bessemer Venture Partners, Georgian Partners, and OMERS Ventures, among others.

Weedbrook acknowledged that redemptions were high but said he thinks this has less to do with enthusiasm for Xanadu or quantum’s potential and more to do with external factors affecting the market. He added that he is pleased with the result, which nets the company around $262 million USD after fees. “We’ll be fine,” he said.

In an interview with BetaKit, Rosenblatt Securities senior research analyst John McPeake said public markets have been in “risk-off mode” since the US-Israel war in Iran began. The major oil-supply disruption has shocked investors. Amid these conditions, he said riskier companies that are farther away from generating significant revenues have been hit the hardest.

McPeake said this weakness has been reflected in quantum stocks, and likely played a role in the level of SPAC investor redemptions that Xanadu experienced. “I think Xanadu unfortunately suffered a little bit from the macro,” he added.

“If you had told me seven months ago [that] by the end of this we’ll be public and have raised $302 million USD, we would’ve taken that back then—and we still [would], so we’re really happy with this,” Weedbrook said. “We’re well-capitalized for the next three or four years.”

McPeake, who covers other public quantum companies including Canadian-born D-Wave Quantum, Rigetti Computing, IonQ, and Quantum Computing Inc, said that while quantum stocks today are trading “substantially” below their highs, they remain expensive relative to their current sales, near-term earning potential, and the rest of the tech market.

Xanadu is not the only quantum firm that sees opportunity in going public via SPAC. As PitchBook reports, US-based Infleqtion went public last month, and Finland’s IQM and France-based Pasqal are hoping to follow suit.

“The companies that are going public recognize that there’s going to be a race for capital and being public gives you an advantage,” McPeake said.

Founded in 2016, Xanadu is working to use photonics-based quantum computing to perform exceptionally fast and complex computations at room temperature, quicker than traditional computers. Weedbrook has said quantum computers could be applied to help discover new drugs or create more powerful electric vehicle batteries.

Xanadu claims its approach offers a few advantages, including the ability to leverage modern chip manufacturing facilities and existing optical components like fibre optics.

Different companies are taking a variety of approaches to developing useful, scalable quantum computers.

“Investors are unsure about what modality will win,” Weedbrook said. “We think there’ll be a couple of winners, but photonics is definitely up there. Before today, you couldn’t invest in [the] photonics modality, so we’re excited to bring that to public markets.”

“The companies that are going public recognize that there’s going to be a race for capital and being public gives you an advantage.”
John McPeake,
Rosenblatt Securities

McPeake thinks Xanadu has a good technology roadmap and an interesting approach that operates primarily at room temperature. He said that the photonic modality has “a big advantage” in terms of how fast the quantum computer can calculate.

Quantum computers, which have the potential to enable advances in secure communications and crack current encryption methods, could have a significant impact on defence—as evidenced by Xanadu’s participation in major research programs in both Canada and the United States.

Xanadu is also in talks with the Canadian and Ontario governments regarding funding to establish advanced semiconductor and photonic manufacturing capabilities in Canada. The company says up to $390 million CAD in combined support is under consideration.

The company plans to use its funding to advance its tech, expand its manufacturing capabilities, and accelerate its commercialization plans. It aims to build a quantum data centre by 2029, and Weedbook said this capital will help Xanadu achieve that vision.

Weedbrook hopes that as a TSX-listed company, Xanadu will be able to drum up some more interest among Canadian investors, including large pension funds.

Feature image courtesy Xanadu.