POET Technologies (PTK:TSXV) is struggling to find its groove of late, despite announcing a valuation report and model indicating fair market value of its key subject property could be as high as $4.2 billion (click here for full details and caveats). With a market cap of just under $200 million, the report may show the potential of its intellectual property in the current marketplace.
The press release stated that, “The valuation model indicates the fair market value of the Subject Property in the markets considered at a 90% confidence level is between $851,235,961 and $4,271,102,920 with a mean value of $2,415,029,242 and a median value of $2,330,489,354.”
Click here for the full release.
POET Technologies’ stock crested above $2 on July 8th to a high of $2.24. Since then, the stock has come under pressure, dropping more than a $1 to a recent low of $0.90 hit on August 7th.
In 5 trading days between August 1st and August 8th, POET’s market traded more than 10 million shares. The stock fluctuated between a low of $0.90 and a high of $1.49 during those days.
That high of $1.49 came on August 1st, or just 3 trading days prior to the company announcing the completion of a new evaluation report on its planar opto-electronic technology.
On August 6th, POET announced that it had received a new valuation report on its intellectual property. POET, of course, is the developer of the planar opto-electronic technology (POET) platform for monolithic fabrication of integrated circuit devices containing both electronic and optical elements on a single semiconductor wafer. If successful, POET may be able to rewrite Moore’s Law which for almost half a century, has allowed the number of transistors on a chip to only double approximately every 1.5 to 2 years.
POET’s research and development team has spent nearly 2 decades attempting to solve this conundrum and, with a dead-end approaching for many electronics manufacturers, the company believes to have done it.
POET’s planar opto-electronic technology, which integrates optics and electronics onto one monolithic chip, was given a valuation model indicating fair market value of the Subject Property in the markets considered at a 90% confidence level is between $851,235,961 and $4,271,102,920 by Pellegrino and Associates LLC. (click here for full details and caveats)
Key fact: Pellegrino and Associates has been around since 2003 and has developed a client base around the world.
More on this press release shortly.
It is important to note that the volatility and price swings in POET Technologies‘ market has likely attracted momentum traders and retail investors looking for that next pop. While this volatility may be coveted and sought after by every TSX Venture trader, it can lead to exaggerated movements and heightened speculation.
For whatever reason, POET’s market failed to significantly react to the valuation report press release.
POET Technologies – 3 Month Chart
POET’s market cap was near $400 million earlier in the year, but hovered below $200 million on August 15th, at roughly $194.89 million.
Pinetree’s Founder and Chairman, Sheldon Inwentash, let go of 1 million shares of POET on August 1st and 5th.
The sales took place at $1.42 (500,000) and $1.34 (500,000) per share.
Pinnacle has previously highlighted Inwentash’s and Pinetree’s buying.
Sheldon’s buying was discussed in an April 8th, 2014 article, titled: Pinetree Capital goes on POET Technologies Buying Spree. Below is a short excerpt from that article.
His actions have been speaking louder than words in respect to POET Technologies of late. Check out these recent buys by the Chairman:
On March 26th he picked up 200,600 shares at $1.20 per share. The following day on March 27th he picked up 157,300 shares at $1.27. On March 28th he grabbed 92,000 at $1.34. Then on April 4th he bought 150,000 at a price of $1.49, followed by another 25,000 shares at $1.50.
Pinetree Capital bought even more, picking up 898,900 shares between $1.20 and $1.49 in the days between March 25th and April 4th.
What makes this recent flurry of buying from Pinetree noteworthy is that POET is up greater than 500% in the past 12 months from its low of $0.315 per share.
Click here to read the entire article.
In respect to the recent news from POET, perhaps, like most summer press releases, investors overlooked the news given the slow time of year for the markets. Below is a short excerpt from the company’s August 6th press release:
P&A performed 10,000 simulations on two income valuation models using a Latin Hypercube sampling algorithm for 10,000 total value calculations.
The valuation model indicates the fair market value of the Subject Property in the markets considered at a 90% confidence level is between $851,235,961 and $4,271,102,920 with a mean value of $2,415,029,242 and a median value of $2,330,489,354. P&A used the statistical median as their expected value, as it removes the impact of improbable outliers. Therefore, in P&A’s opinion, based upon a reasonable degree of probability within the valuation profession, the fair market value of the Subject Property in the context of the POET licensing program is $2,330,489,354 using the income approach to value.
This is a noteworthy report for any technology company to produce. The market seems a bit confused and almost appears to be in a state of disbelief as it attempts to decipher the information available provided by P&A in a summary on the company’s website.
The company noted in its press release that: The New P&A Report contains a great deal of proprietary and sensitive confidential information, and will not be made public.
Final excerpt from POET’s August 6th press release:
It is important to note that a third party valuation is not an indication of interest by any party, nor does it represent an actual offer to purchase the POET intellectual property. As indicated in the report, the POET Technology is still under development, and no assurances can be given that such development will be successfully completed, that the technology will be brought to commercial realization or that the Company’s target markets will adopt this technology. Commercial applications of the technology will likely not be available for several years, if ever.
Click here to read the entire press release.
Key fact: Pellegrino and Associates specializes in valuation services that merge complex intellectual property, finance, and technology issues into quantifiable, defensible value opinions.
POET’s appointment of Ajit Manocha into the role of Executive Vice Chairman in early July was also noteworthy. Mr. Manocha was most recently CEO of GlobalFoundries, the second-largest semiconductor foundry in the world.
POET Technologies is a reminder that no matter what a company may potentially be able to do, or how big the potential market it might be able to capitalize on is, speculation can only carry a stock so high before investors demand revenue/commercialization. Ironically, if a technology company makes it to that stage, typically a significant portion of the gains have already been realized.
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