We came across a bearish thesis on Rigetti Computing, Inc. (NASDAQ:RGTI) on wallstreetbets Subreddit Page by value1024. In this article, we will summarize the bears’ thesis on RGTI. Rigetti Computing, Inc. (NASDAQ:RGTI)’s share was trading at $19.02 as of Jan 3rd.
A quantum computer on a countertop in an engineering laboratory with a technician at work.
RGTI’s recent performance highlights a troubling trend for investors. In late November, the company diluted shares at a low price of $2, yet the market saw a speculative surge, driving the stock price to $20. This rise seems driven more by hype than any substantial business development. Despite this, management is likely to dilute again, though probably not above $2 unless they execute a high-risk death spiral offering, which would lead to shorting by the funding institution. The situation is compounded by management’s actions, as several insiders sold their shares shortly after the price spike in November, with most sales taking place under $5 per share. This raises concerns about the company’s internal confidence in its valuation, especially given that insiders typically sell only when they believe the stock is overvalued. The situation is further exacerbated by a Benzinga article questioning whether RGTI’s management underestimated its value, but the real issue seems to be that management may have been overestimating it. Ultimately, RGTI’s downfall appears inevitable, as insiders, who are most familiar with the company’s operations and stock, have chosen to sell at significant discounts, casting doubt on the long-term prospects for the company, regardless of its technology.
Rigetti Computing, Inc. (NASDAQ:RGTI) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 7 hedge fund portfolios held RGTI at the end of the third quarter which was 7 in the previous quarter. While we acknowledge the risk and potential of RGTI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RGTI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.