Is IONQ A Scam? When it comes to corporate fraud, the list of offenders is dreadfully long – and some of the names on it were once highly respected. For example, in the US, the collapse of Enron cost shareholders $74 billion, and Germany recently dealt with the discovery of fraud at a major fintech company, Wirecard. Its shareholders lost everything.
Earlier this year, Elizabeth Holmes went on trial and was found guilty of multiple counts of fraud. She had persuaded investors that her blood testing technology was ready for market when, in fact, it wasn’t anywhere close to functional. Investors lost more than $700 million by the time the company shut down for good.
In 2020, WeWork co-founder and CEO Adam Neumann was asked to resign after covering up massive financial losses. In 2021, electric vehicle maker Nikola lost its founder and executive chairman, Trevor Milton, after allegations that he made false claims about the company’s technological capabilities.
In short, examples of corporate fraud are so plentiful that it comes as no surprise when experts, analysts, and shareholders are suspicious – especially when financial reports or new technology sound too good to be true.
Does game-changing trapped-ion technology qualify as too good to be true? Evidently so. Right now, all eyes are on quantum computing hardware and software developer IonQ. IONQ stock has lost two-thirds of its value in the past month. What happened?
Why Is IonQ Stock Dropping?
At the moment, IonQ is in the spotlight – and not in a good way. At the request of IonQ investors, the law firm Pomerantz LLP is investigating whether the company’s officers and/or directors have committed securities fraud or any other illegal business practices.
That’s bad news for IonQ because Pomerantz is the world’s oldest firm specializing in representing defrauded investors. If there is anything amiss, Pomerantz is sure to find it.
Is IonQ a scam?
The investigation is just beginning, so it’s hard to say for sure. What we do know is that Scorpion Capital, a company dedicated to uncovering fraud and “activist short selling”, believes IonQ’s technology claims are a hoax.
IonQ share prices were already on their way down for a variety of reasons before the Scorpion Capital report, but after the report’s publication on May 3, 2022, the bottom dropped out. IONQ stock went down another ten percent, and no one believes it will recover anytime soon – if ever.
IonQ: The World’s Most Powerful Computer?
Understanding the ins and outs of IonQ’s products gets into complex computing concepts. The simplest explanation is that IonQ says it has created the most powerful quantum computer in the world. If accurate, the type of quantum computing IonQ says it has developed could completely transform the role of computers in solving problems.
Essentially, traditional computers solve problems linearly. They try out possible solutions one at a time until they come upon the correct answer.
A very simple example is identifying a four-digit password. Traditional computers run tests starting with 0001, then 0002, and so forth. That takes time. In the case of very complicated problems, it could be centuries before a standard computer finished testing all possible combinations.
Quantum computing approaches problem solving differently. It uses qubits instead of binary numbers to process data. As a result, quantum computers can move in multiple directions simultaneously, dramatically reducing the amount of time required to problem solve. As the only publicly-trading quantum computing company, IONQ stock has been a popular choice for tech buffs.
But what if IonQ doesn’t actually have the most powerful quantum computer in the world? What if it hasn’t developed any working quantum technology at all?
What Does The Scorpion Report On IonQ Say?
Scorpion Capital didn’t pull punches when it published its report on IonQ. The key allegations, bulleted in bold at the top of the first page, include:
- IonQ is a company in name only. In reality, there are two part-time co-founders running what amounts to a “side hustle.”
- The prototype that IonQ presents as the world’s most powerful quantum computer is a toy that is exceptionally slow, prone to errors and downtime, and incapable of basic calculations like 1+1.
- IonQ has no intellectual property of value.
- The revenue reported by IonQ is fundamentally fictitious.
- The CEO, who claims to be a child prodigy, appears to have falsified his status as a graduate of the Massachusetts Institute of Technology (MIT).
The evidence presented by Scorpion is compelling, assuming that the firm is providing an accurate account of its research. Scorpion said that it conducted 25 in-depth interviews, including seven with former executives and employees. In addition, Scorpion says it hired experts to test IonQ’s quantum computer. Their results were fully at odds with IonQ’s stated capabilities.
Has IonQ Responded to the Scorpion Report?
IonQ published a brief response to the Scorpion report on May 4th. It featured an assertion by the Chairman of IonQ’s Board of Directors that he has complete faith in the company’s leadership.
IonQ said Scorpion’s report contained mischaracterizations and inaccuracies, and it noted that the author stood to profit from a decline in the value of IONQ stock. That remark referenced the fact that Scorpion Capital disclosed that it has a short position in IonQ.
IonQ suggested that investors consult more credible sources before making investment decisions – for example, the company’s SEC filings. Perhaps that is good advice.
However, it’s a bit too similar to the Theranos debacle. Holmes and her team told critics to reference company publications for accurate information. As with Theranos, IonQ didn’t quash the allegations altogether with a simple demonstration of the product’s efficacy.
Does that mean IONQ is a scam?
No, not necessarily. But it is a good reason to pause and let events play out – particularly the Pomerantz investigation – before putting any more cash into IONQ stock.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.