The quantum-computing company is buying the venture-backed cybersecurity firm with shares priced on a 20-day average between $33.07 and $49.61. IonQ traded near $36.20 on Monday, about 9.5% above the floor.
IonQ is using its own stock to buy a private cybersecurity company, and that stock fell on the day the deal was announced, alongside declines in other quantum-computing shares.
The quantum-computing company said Monday it had signed a definitive agreement to acquire Elisity in an all-stock transaction valued at up to $1.3 billion, including up to $150 million in earnout payments. Elisity sells software that segments corporate networks under a "zero trust" security model. IonQ said the combination would pair Elisity's tools with post-quantum cryptography and quantum key distribution.
IonQ shares fell about 9.2% to near $36.20 at about 1:50 p.m. Eastern, from a Friday close of $39.89. Other quantum-computing stocks also fell: Rigetti Computing about 5.3%, D-Wave Quantum about 5.5% and Quantum Computing Inc. about 6.8%. The Nasdaq Composite was down about 0.4%.
The collar
The number of IonQ shares Elisity's owners receive will be set using IonQ's 20-trading-day volume-weighted average price, within a collar of $33.07 to $49.61 a share. That band sits 20% either side of IonQ's Oct. 7 close of $41.34. Below the floor, the share count stops rising, and above the cap it stops falling.
The 20-day average was near $41.55 on Monday, close to the middle of the collar, so a single day's drop moves it only gradually. Monday's price sits in the lower half of the range and about 9.5% above the floor. Converting roughly $1.15 billion, the deal value excluding the earnout, at the collar's two ends gives a range of roughly 23 million to 35 million IonQ shares.
The deal is expected to close in the fourth quarter, subject to regulatory approval and other conditions.
What the investors get
For Elisity's venture backers, the transaction is an exit into a public company's stock rather than cash. IonQ did not disclose Elisity's revenue or its last private valuation. IonQ said Elisity has more than 100 customer deployments, that its revenue and customer count doubled over the past year, and that it has had zero churn among deployed customers.
Market implications
One reading is that IonQ is buying a growing product with existing enterprise customers to sell quantum-security services into, and that using stock preserves cash for its core research.
A second reading is that Monday's decline reflects concern about dilution and execution. IonQ is paying with shares that fell on the day of the announcement, for a company whose financials it has not published, in a field adjacent to its main business. Declines across other quantum stocks suggest the deal was not the only factor.
What to watch
Investors will look for any merger filing to disclose Elisity's financials, the share count and the earnout conditions. Where IonQ's 20-day average settles within the $33.07 to $49.61 collar will determine how many shares Elisity's owners receive.