Short-Seller White Diamond Research Expects ‘Serious Dilution Risk' For This Small-Cap Pharma-Turned-Defense Play

White Diamond Research said it believes Quantum Cyber poses a high dilution risk to investors once the company’s CEO begins unloading shares.

• While reviewing QUCY's SEC filings, White Diamond found that CEO David Lazar invested $6 million in the company for convertible equity representing 477 million shares.
• The company’s recent decision to buy SpaceX shares as an asset, like Triller, was seen by the firm as a means to create a pump-and-dump opportunity for insiders.
• The firm also questioned the nature of the company’s business and the connection between its corporate name and drone manufacturing.

Shares of Quantum Cyber (QUCY) attracted significant investor attention on Monday after a report from White Diamond Research raised concerns about the company, which pivoted from pharmaceuticals to defense this year.

At the time of writing, QUCY stock traded marginally in the green.

White Diamond’s Main Concern On QUCY

While reviewing its SEC filings, White Diamond found that Quantum Cyber chief executive David Lazar invested $6 million in the company for convertible equity representing 477 million shares.

“This could potentially trigger massive dilution for existing shareholders,” the firm said. “Current shareholders are in for a rude awakening if and when insiders, mainly David Lazar, decides to dump his hundreds of millions of shares.”

The firm also questioned the nature of the company’s business, whether it is in the quantum computing or cybersecurity space, and what connection its corporate name has with manufacturing drones and unmanned aerial systems, implying that it is trying to play with buzzwords.

QUCY: A Project For Insiders?

Among other things, the firm wrote about the company’s recent drone partnership with BP United and highlighted that its partner's website was broken and blank.

Moreover, the recent decision to buy SpaceX shares as an asset, like Triller, was seen by the firm as a means to create a pump-and-dump opportunity for insiders. It noted that Triller had planned to buy SpaceX shares at a discount before its IPO, whereas Quantum Cyber has to buy them at face value.

“We think QUCY is a project created for insiders to dump hundreds of millions of shares that they received for much lower than the current market price. We believe there is little to no fundamental value in the company and its business segments,” the firm said.

What Retail Traders Think Of QUCY Stock

On Stocktwits, retail sentiment toward QUCY stock remained in ‘bullish’ territory over the last 24 hours.

QUCY stock has surged 42% so far this year and 14% over the last 12 months.

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