POET's Transformative Technology Represents Remarkable Opportunity

POET Technologies Inc. (NASDAQ: POET, TSX Venture: PTK), the designer and developer of the POET Optical Interposer™ and Photonic Integrated Circuits (PICs) for the data center, tele-communication and artificial intelligence markets announced last week that it has released four optical engines to production. In a press release that was widely distributed in technology circles but little if any in the financial press, POET (who perfected the first ever chip scale integration of photonics and electronics using wafer level processing for fabrication, assembly, testing and packaging) also announced that management expects to release more products to production over the next few months. 

The implications of this rollout were not lost on investors who have been avid followers of this company's development as the stock moved up 40% from a close of $3.26 on January 9 to close at $4.58 on the 10th. But beyond this relatively small community of investors, the POET reveal did not garner the attention of the broader swath of investors one might expect given the impact POET’s Optical Interposer will have on markets that generate 100s of billions of dollars in capital investment each year.  This is likely due in some part to the lack of Wall Street analyst coverage of POET and its short tenure as a NASDAQ listed company (prior to 2022 it was listed exclusively on the Toronto Venture Exchange), with each of these factors and others contributing to result in the company flying well below most investors' radar screen. And the stock's trading range below $5 has limited institutions' ability to invest in a high potential but early-stage technology company they might otherwise pursue.

We believe last week's announcement represents a considerable technological breakthrough that will be tremendously disruptive in the telecom and data center marketplace. The introduction of such a cost-effective solution with simplified transceiver design and fewer active alignments will allow for reduced OpEx and CapEx spending by the developers of hyperscale data centers like Apple, Microsoft, Meta and Google. While the company is playing its hand very close to the vest as to which companies are among the six who have executed contracts or the twenty who have requested samples for integration testing, we believe that some of the largest players in the space will be among the earliest adopters of the POET technology and this will drive revenue in the hundreds of millions for POET in its first full calendar year of production with the potential for many billions over a longer term time horizon.  

In summary, we view POET as an anomaly in that this is a company that would likely be a "unicorn" sporting a billion dollar plus valuation and a long line of institutional investors seeking a stake if a company at its current stage were private and seeking capital. But POET is instead a not very well known publicly traded company that has but 1.99% of its shares held by institutional investors and daily trading volume of less than 29k shares per day prior to last week's announcement.  While the trading volume has picked up noticeably in the days since the announcement, the price is still below the $5 level that most institutions require for investment and we believe that creates an extraordinary opportunity for investors to buy shares at a cost that could end up being a fraction of the cost of a share when the company becomes widely followed by analysts and investors. We believe that savvy traders and investors who understand the implications of POET's announcement have spent the last week working the POET trade to build positions ahead of what will very soon be significant institutional buying.  With POET still trading at less than half its 52-week high of $11, we believe that shares will move materially higher in the near term, possibly even surpassing its previous highs for the year as institutions seek to build a meaningful stake in this transformative technology. And longer-term investors at current prices could see exponential returns if they have the patience to hold on to see the company report the many billions of dollars in revenue that we believe the POET Optical Interposer will generate over the next few years. POET Technologies is a great example of the kind of stocks we comb the bushes for in our search for micro cap multi-baggers and we believe the chance to buy shares in the current range represents a remarkable buying opportunity.

—rec’d DS 1/16/23 @ 3:27pm EST for release at 7:30am EST 1/17/23