For the vast majority of Xanadu Quantum Technologies Ltd. XNDU-T shareholders, watching the share price of the newly public company has been a gut-wrenching daily experience they can’t do anything about. Monday was no exception.
After rising by 24 per cent on Friday, shares of the Toronto quantum computer developer crashed by 61.3 per cent Monday, the same day the company filed a prospectus enabling shareholders to register their stock for sale.
The price drop triggered a temporary trading halt on the Toronto Stock Exchange at the behest of the Canadian Investment Regulatory Organization (Xanadu stock triggered five such halts on one day last month).
With that performance, Xanadu stock posted its 13th trading day – out of 26 since the company went public in late March by merging with a NASDAQ-listed special purpose acquisition company (SPAC) – with a share price movement of more than 10 per cent.
It was its eighth trading day with more than a 20-per-cent swing, and its third with more than 50 per cent.
The stock has traded for as little as US$7.44 and as much as US$42.44 in the last five weeks. It closed at US$13.99 on Monday.
Quantum stocks have gyrated wildly in the past few years, making strong gains in late 2024 and through 2025 on the heels of a string of technical breakthroughs on the machines, which harness the peculiar attributes of subatomic particles for their computing power. They subsequently sold off more recently as geopolitical uncertainty mounted and tech valuations declined broadly early this year, then rebounded in early spring.
The industry is in its infancy and no company, including Xanadu, has yet produced a commercially relevant quantum computer that can achieve the technology’s full potential, though several are valued into the billions of dollars. Short sellers have targeted several quantum companies, including Xanadu.
Furthermore, Xanadu has a thin float, meaning very few of its shares have been available to buy and sell, exacerbating the stock’s extreme movements. Of its nearly 299 million Class A and Class B shares, the vast majority are held by early shareholders that funded Xanadu through venture capital deals. Those shares are subject to a lockup that expires in September. Just 4.77 million Class B shares, which went to former holders of the SPAC, are freely tradeable.
That is changing, however. Trading restrictions are set to lift this week, following regulatory clearance, on 27.5 million Xanadu shares that were issued to participants in a private financing round that accompanied the SPAC merger.
According to a prospectus filed early Monday ‐ which appeared to trigger the selloff ‐ holders of most of those early shares that are locked up until September have now registered their stock for sale. That doesn’t mean they will necessarily sell, but it gives holders the option. Most of those shareholders are still subject to those lock-ups expiring in early fall and can’t sell until then.
The ability to sell could come sooner for the sponsor of the SPAC, Crane Harbor Acquisition Corp. It will be able to trade 550,000 of its locked-up shares if Xanadu stock closes at US$12.50 or more for 20 trading days within any 30 consecutive trading-day period, and 550,000 more shares if the closing price exceeds US$15 under the same conditions. Another 640,000 shares issued in a private placement to investors when Crane Harbor went public last year could also be unlocked for trading under the same conditions.
Xanadu stock closed above US$15 in the last 13 trading sessions and above US$12.50 in the last 15, meaning the lockup could lift within a couple of weeks on up to 1.74 million shares, if the stock can maintain even Monday’s sharply lower levels.
During Xanadu’s brief period as a public company, its market cap has soared above US$10-billion at times, leaving some investors with eye-popping unrealized gains. For example, at Friday’s close, Ontario Municipal Employees Retirement System (OMERS), the company’s earliest institutional investor, held US$1.45-billion worth of Xanadu stock. That was worth 68 per cent more than its top stockholding as of Dec. 31 (Nvidia Corp.) and more than its combined holdings at year-end of Canada’s Big Five Banks, JPMorgan Chase & Co. and Mastercard Inc.
Even after the selloff Monday, OMERS’s stake – for which it paid less than US$30 million ‐ was valued at more than US$560 million.