Honeywell’s quantum company goes public. What investors should know about the IPO
Honeywell-backed Quantinuum saw shares jump 19% to over $71 apiece in its debut on Thursday. Shares of the Quantum company closed well above those highs, up less than 1 percent, and its market capitalization reached $15.66 billion. About 28 million Quantinuum shares were priced at $60 Wednesday night; This was above the previous expected range of $53 to $55. The offering raised $1.68 billion. Quantinuum is listed on Nasdaq under the symbol QNT. The IPO was good news not only for Quantinuum but also for the Honeywell International club name. The industrial conglomerate has leverage as Quantinuum’s majority shareholder, holding 48% of the total voting power. However, as Honeywell investors, the Club does not receive any shares from Quantinuum. The deal wasn’t a spinoff like other recent separations that brought us FedEx Freight (spun off from FedEx) and Qnity Electronics (spun off from DuPont). We don’t plan to buy Quantinuum for the portfolio because, like other quantum stocks, it is highly speculative. The Quantinuum deal is a win — albeit an incremental one — for Honeywell because it gives a business a valuation where investors previously had to guess what it was worth. Quantinuum was formed in 2021 by the merger of Honeywell’s then Quantum Solutions group and Cambridge Quantum. Since quantum computing is still in its infancy, it has never been a major source of revenue for Honeywell. Honeywell hasn’t said much about what it will do with its Quantinuum shares after the offering is completed. But Quantinuum CEO Rajeeb Hazra told CNBC on Thursday that Honeywell “will continue to be a very disciplined shareholder” and will “continue to assist with deals like our supply chain, manufacturing and access to customer bases.” “Over time, they will take care of this asset, they will turn this asset into money,” he added. The investment in Quantinuum helps Honeywell advance quantum computing, one of the fastest-growing technology sectors. The nascent industry caught the attention of scientists, researchers, and Wall Street. The technology uses the principles of quantum mechanics to solve complex problems that traditional computers cannot solve. Many of the currently publicly traded quantum stocks have surged this year, including Rigetti, IonQ and D-Wave. But rest assured, they were extremely variable. The group took off late last month after the Commerce Department awarded $2 billion in grants to quantum computing companies. Quantinuum was among those to receive federal funding. Honeywell shares jumped upon the May 21 announcement and would later rise even higher on various updates to Quantinuum’s IPO. At the time, we didn’t think Honeywell should be so prominent in quantum news, so we sold some and booked profits on May 26th. There are still many unknowns about quantum computing. “The applications are still being developed,” Matt Kennedy, senior strategist at IPO research firm Renaissance Capital, told CNBC in an interview. “There are a lot of possibilities right now for what the market will look like in a few years. To be clear, [it is] It’s not an established market.” Kennedy added that it’s “an industry seeking commercialization, but I think the expectations are that we’ll get there in five years.” This is fine with our shares in Honeywell International because Quantinuum is not a significant part of our investment thesis. But the IPO was another step in the once-expanding company’s efforts to streamline its operations under CEO Vimal Kapur and monetize non-core businesses. It has been a multi-step process, including divisions and divisions. With Kapur at the helm over the last three years, Honeywell Aerospace is expected to become a separate, publicly traded company under the symbol HONA. The company’s remaining automation business will retain HON as equity manager and Kapur as CEO. During its Investor Day on Wednesday, Honeywell Aerospace announced its long-term financial goals ahead of its June 29 spin-off. Management has said it expects to generate annual adjusted earnings (EBIT) of at least $6.5 billion by the end of the decade. According to FactSet, the current Honeywell configuration will generate $6.2 billion in operating revenue by 2029. Honeywell Aerospace CEO Jim Currier said becoming an independent company would “unlock a significant amount of firepower.” [with] a purpose-built management team focused on just one strategy, one mission, as opposed to different missions like being part of a conglomerate.” In a CNBC interview on the sidelines of the event, Currier said he expects the most growth “in the commercial air transportation market and in defense and space.” If you subscribe to the CNBC Investment Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation’s portfolio. After discussing a stock on CNBC TV, Jim waits 72 hours before executing the transaction. TERMS AND PRIVACY POLICY NO FIDUCT OBLIGATION OR DUTY SHALL EXIST OR BE CREATED IN CONNECTION WITH THE RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. RESULTS OR PROFIT ARE NOT GUARANTEED.
