Honeywell’s quantum company goes public. What investors should know about the IPO

Honeywell-backed Quantinuum saw shares jump as much as 19% to over $71 each in their Thursday debut. The quantum company's stock closed well off those highs, up less than 1%, bringing the market cap to $15.66 billion. Roughly 28 million Quantinuum shares were priced at $60 apiece Wednesday night, above its previous expected range of $53 to $55. The offering raised $1.68 billion. Quantinuum is listed on the Nasdaq under the ticker symbol QNT. The IPO was not only good news for Quantinuum, but also for Club name Honeywell International . The industrial conglomerate benefits as a majority Quantinuum shareholder, retaining 48% of the combined voting power. As Honeywell investors, however, the Club does not get any shares of Quantinuum. The deal was not a spin-off like other recent separations, which brought us FedEx Freight (spun off from FedEx ) and Qnity Electronics (spun off from DuPont ). We do not intend to buy Quantinuum for the portfolio because, like other quantum stocks, it is highly speculative. The Quantinuum deal is a win — albeit incremental — for Honeywell because it gives a valuation to a business that investors previously had to guess what it was worth. Quantinuum was formed back in 2021 through the merger of Honeywell's then-Quantum Solutions group and Cambridge Quantum. It's never been a huge source of revenue for Honeywell, as quantum computing at large is still in its early innings. Honeywell has not revealed much about what it will do with its Quantinuum stake now that the offering is complete. However, Quantinuum CEO Rajeeb Hazra told CNBC Thursday that Honeywell "will continue to be a very disciplined shareholder" and "continue to help as they have been with agreements on our supply chain, manufacturing, access to their customer base." He added, "Over time, they will deal with this asset, monetize this asset." The investment in Quantinuum does give Honeywell a hand in one of the fastest-growing tech sectors — quantum computing. The nascent industry has captured the attention of scientists and researchers and Wall Street. The technology uses the principles of quantum mechanics to solve complex problems that traditional computers cannot. Many of the already public quantum stocks, including Rigetti , IonQ , and D-Wave , are up huge this year. But to be sure, they have been extremely volatile. The group soared late last month after the Commerce Department awarded $2 billion in grants to quantum computing companies. Quantinuum was among those set to receive federal funding. Honeywell stock jumped on the May 21 announcement, and would later run even higher on various updates in the lead-up to Quantinuum's IPO. At the time, we didn't think Honeywell should be up this much on quantum news, so we sold some and booked profits on May 26. There are still a lot of unknowns about quantum computing. "The applications are still being developed," Matt Kennedy, a senior strategist at IPO research firm Renaissance Capital, told CNBC in an interview. "There are a lot of maybes right now in terms of what the market will look like in a few years. So, just to be clear, [it is] not an established market." Kennedy added it is an industry "in search of commercialization, but I think expectations are that we'll get there in five years." That's no problem for our Honeywell International stake because Quantinuum is not a major part of our investment thesis. The IPO was, however, another step in the once-sprawling company's efforts under CEO Vimal Kapur to streamline operations and monetize non-core businesses. It's been a multiple-step process, including spin-offs and divestitures, over the past three years of Kapur at the helm. The final piece is expected later this month when Honeywell Aerospace becomes a separate, publicly traded company under the ticker symbol HONA. The company's remaining automation business will be renamed Honeywell Technologies. It will keep HON as its stock ticker and Kapur as its CEO. This breakup is the catalyst we have been waiting for to set each business on its own path and to bring out more shareholder value in the process. While Honeywell shares hit an all-time high in early March, they have been relatively flat since late 2021. We call that spin purgatory . HON 5Y mountain Honeywell International 5 years During its Investor Day on Wednesday, Honeywell Aerospace disclosed long-term financial targets ahead of its June 29 spin-off. Management said it expects to bring in at least $6.5 billion in annual adjusted earnings before interest and taxes (EBIT) by the end of the decade. Analysts estimated that the aerospace segment within the current Honeywell configuration would make $6.2 billion in operating income in 2029, according to FactSet. Honeywell Aerospace CEO Jim Currier said that becoming a standalone company "unlocks substantial firepower ... [with] a purpose-built management team just solely focused on one strategy, one mission as opposed to disparate missions as being a 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 transport market and in defense and space." (Jim Cramer's Charitable Trust is long HON, DD, FDXF, FDX, Q. See here for a full list of the stocks.) As a subscriber to the CNBC Investing 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 trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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