Xanadu CEO Christian Weedbrook at the company’s Toronto office in September, 2025.Fred Lum/The Globe and Mail
Xanadu Quantum Technologies Inc. said Wednesday it has entered negotiations with the Ontario and federal governments to secure up to $390-million in support as the Toronto company prepares to go public.
It’s unusual for a company to announce a prospective government funding arrangement, including specific dollar amounts, at such an early stage. But the optics matter for Xanadu as it closes in on two key milestones.
Next week Xanadu will learn how much of a potential US$455-million in net cash it will secure in its go-public transaction – or if the deal proceeds at all. If it does, Xanadu will become the first Canadian technology company to go public on the Toronto Stock Exchange since 2021.
The deal, struck last November, would see Xanadu merge with Nasdaq-listed special purpose acquisition company (SPAC) Crane Harbor Acquisition Corp. CHAC-Q and cross-list on the TSX. Investors will vote next Thursday on the deal, which if approved, is expected to close this month.
Before that, Crane unit holders have until Tuesday morning to say if they want in or out of the deal, which comes at a period of extreme market and geopolitical instability.
The SPAC financing comes in two parts. Private investors have committed to buy US$275-million of stock in the combined company. Ninety per cent of that is from new backers, including chip giant AMD, BMO Global Asset Management, CIBC Asset Management, MMCAP Ventures, Planet First Partners and Polar Asset Partners.
Up to another US$227-million would come from Crane which, like other SPACs, is a publicly traded shell company that has raised money on the promise of merging with another company within two years.
However, the SPAC money is refundable for Crane investors who don’t like the deal, which values the combined entity at US$3.1-billion.
That redemption feature is a wild card in any SPAC combination. When Canadian-founded D-Wave Quantum Inc. QBTS-N merged with a SPAC in 2022, 97 per cent of unit holders in the latter redeemed. The remaining US$9-million didn’t cover deal costs, initially leaving the company in a tight cash position once it went public. Transaction expenses on the Xanadu-Crane tie-up are expected to be US$45-million.
“We want to get out as many great news articles and stories about what Xanadu is doing to try and make sure that we can keep as much of that money as possible” from the SPAC, Xanadu founder and chief executive officer Christian Weedbrook said.
The government funding deal if completed would support a Xanadu initiative to establish advanced semiconductor and photonic manufacturing capabilities in Canada.
“The Government of Canada is a strong supporter of Xanadu and its mission, as reflected in previous funding agreements, and we remain in close contact with the company as it continues to grow,” said Sofia Ouslis, a spokeswoman for federal AI Minister Evan Solomon, when asked about the prospective government funding.
Mr. Weedbrook told analysts last week Xanadu needed to raise US$1-billion to fund its goal of building a quantum computer-based data centre by 2030. Securing as much of the SPAC money as possible will help, as will the US$275-million private funding. Xanadu has previously raised US$250-million from investors during its 10-year life.
Xanadu is one of the leading developers of quantum computers, which unlike conventional systems don’t derive power from manipulating bits of information, but by tapping the peculiar properties of matter and light at microscopic scales.
There are several ways to leverage these effects in a quantum computer, and no clear winner has emerged yet. But if proponents are right, quantum computers will be vastly more powerful than the world’s most advanced supercomputers and able to do calculations beyond the reach of conventional systems. That could open new applications in fields such as material science, drug discovery and financial forecasting.
Quantum computers could also enable bad actors to pick the locks on cryptography algorithms that secure the world’s digital economy.
Canada was an early leader in quantum, and the federal government has indicated that supporting its homegrown industry is of national importance. Three companies – Xanadu, Photonic Inc. and Nord Quantique – are among 11 that have advanced to the second stage of a U.S. Defense Advanced Research Projects Agency competition challenging developers to show they can build a commercial-grade quantum computer by 2033. Last December, Ottawa committed up to $23-million apiece to those three (plus a fourth company that isn’t in the competition), matching money from DARPA.
If companies in the DARPA process make it to the end, they could get another US$300-million from the U.S. agency. Canadian industry observers are pushing the government to match that.
Xanadu’s system performs calculations using packets of laser light connected by fibre optic networks. The method is different from other quantum computers whose chips need to be cooled to temperatures just above absolute zero (-273.15 C), to harness their quantum effects. Xanadu’s machines largely operate at room temperature.
Like others, Xanadu has marked its progress with a series of technical papers published in Nature and other top science journals. In 2022, it became the third group to announce one of its machines had achieved “quantum advantage” by performing a particular calculation in two minutes that would have taken a conventional computer seven million years.
Last year, Xanadu unveiled a chip capable of performing quantum error correction, a measure seen as essential for reaching reliable performance for practical uses. The system is also built via a modular approach, making it easier to network and scale up than other systems.
Continued efforts to correct errors and improve performance remain a key challenge for Xanadu and its rivals – though that hasn’t deterred investors from pouring billions of dollars into the sector in the past two years.
Xanadu has also developed open-source software called Penny Lane that has 35,000 active users across an array of quantum systems.