Objectively - it's a bubble. No dog in the fight.

*Disclaimer* I’m no longer short OR long this company — I’ve been both. 

Everyone should do what you want, but this IS a bubble. As someone who has been badly burned by irrational exuberance in the past, if you have “life changing” money, please take some profits. If you’re down big on it, cut your losses and live to fight another day. Could it go up? Yes, but it will be 100% devoid of rational driving forces. Years later, I still randomly think about how much paper gains I lost due to greed.

I gathered some of my thoughts that guided me here. Not that it matters, but I work in an investment bank. This has zero affiliation with my firm.

I hope some of you have made out pretty nicely, but  those “long-term holders” should continuously reevaluate their priors and understand that RGTI is a house of cards.

Rumors/Industry Hype

  • Google’s Willow “breakthrough” was achieved with unbelievable amounts of capital, talent, and manpower. They don’t need that segment to be profitable and can eat losses into perpetuity. I don’t see why this is bullish for any of these small-caps with little cash in their coffers.
  • Nvidia’s comments: 
    • Jensen was just calling it how it is, quantum is not ready for the big stage yet. Quantum job postings proliferating at Nvidia doesn’t mean he’s talking out of both sides of his mouth. He sees the demand and investors are increasingly scrutinizing Nvidia on their lack of diversified end-markets — that’s why he is (weirdly) getting into personal computers and robotics. If he can make the smallest bit of headway on quantum, he entices more investors regardless of how informed they are. These comments rightfully plunged the quantum sector.
    • RGTI is currently .08% of NVDAs market cap and was .16% at its the peak. NVDA could fart that check out today with no one batting an eye. NVDA is not artificially suppressing the sector to acquire at a discount.
  • I thought Zuck’s comments on JRE were a nothing burger. It shouldn’t have moved the stock, but it’s another red flag that it actually did.
  • Cramer gets shit on a ton. I get it, inverse Cramer ETF has done very well. However, that doesn’t mean he is a COMPLETE dunce. He’s commenting on a bubble. He’s seen bubbles over the course of his entire career and it’s much easier to objectively opine on a bubble when you have no skin in the game. People lose their asses badly in these bubbles and he’s just trying to prevent that from happening to more people.

RGTI Micro Economics

  • All indicators point to RGTI being significantly overvalued.
    • They raised $100M at $2 a share in November. 
    • The CEO specifically called out the ridiculous stock price action while speaking at the recent conference.
    • RGTI insiders have been selling through this entire rally at prices between $0.75 — $6. We haven’t seen a single insider purchase.
  • RGTI shares exchanged in a day exceeding the total shares outstanding is practically unheard of. This leads to these huge up days, but that is just as likely to cause the floor fall out beneath RGTI. This trading volume has occurred multiple days now. “Escalator up, elevator down” is extremely prescient in this situation.
  • As of the latest 10K, the company burns between $60M - 80M in cash a year. While I’m shocked they haven’t raised more money at these levels, the environment when they raise again will certainly be more difficult.
  • They have weak sales, a weak pipeline, non-existent margins, and little real-world application. Who is going to buy these “products”?
  • Downstream quantum infrastructure isn’t being developed. If Apple’s App Store didn’t have developers to create useful applications, it wouldn’t be worth a damn thing.
  • The CEOs of all quantum stocks, not just RGTI, have been unimpressive at every speaking event they’ve participated in. This could just be a function of their speaking skills, but it could also be indicative of the kind of talent these companies have. RGTI’s CEO seems like “just a guy”, I haven’t been impressed. The weasle-y D-Wave CNBC interview followed by an 8K with shitty pipeline guidance was pathetic.
    • Chad Rigetti, the original founder, could've been a worse CEO but this current guy ain't it.
  • Martin Shkreli continues to post about the RGTI and IONQ machines being offline. Admittedly, I don’t know enough about this — or if it’s even legitimate, but your only product regularly being non-functional isn’t good. Perhaps someone with a better quantum understanding could weigh in with more insight.

Macro Economics 

  • Market breadth and concentration is awful, ~17% of companies in the S&P are trading above their 50DMA and 39% of total market cap is held by the top-10 stocks. Correlation is the killer here, when Mag7 falls, everything falls. High beta small cap, non-profitable stocks get hit harder on these drawdowns. 
  • COVID bucks are GONE. The fed has run down nearly all of the money within their reverse repo operations and liquidity is drying up quickly.
  • Correlation between equities, housing, crypto, commodities, etc. is much higher than you think. When one or two of these rolls over, they sink the whole ship. We’ve seen signs of this multiple times over the past quarter.
  • Incredible amounts of uncertainty around the economy.
    • BLS data (NFP, CPI, PPI) has been proven to be consistently incorrect and/or deceptive over the past 18 months. Who knows the extent of what fraud Trump is going to uncover when he gets in office. 
    • PPI and CPI came in hot, but not PIPING hot. That’s what drove the markets higher today — that is not sustainable. There can’t be a single person on reddit that hasn’t experienced hyperinflation, we all know it’s still rampant regardless of “what the data says”.
    • In uncertain times, investors flock to safer companies with healthy balance sheets, predictable revenues, and healthy cash flow  — RGTI possesses none of these traits. High yields could exacerbate this as investors also flock to Treasurys.
  • This company has only operated in an easy-money environment. Money won’t be as easy to come by over these next few years.
  • This is a deSPAC’d stock. RGTI may fall victim to the same fate, but SPACs have a terrible track record. 

I suggest taking what you have and running, but if you insist on sticking around just know what you're really in.