www.pinnacledigest.com/node/1283533

POET Technologies: valuation report has investors doubtful

Pinnacle Digest first highlighted and wrote about POET Technologies when its volume spiked back on January 7th, 2014. The stock was trading at just $0.57 per share then. After hitting a high of $2.87 early in the year, its share price has been under pressure for months.

Click here to read that article, titled, POET Technologies: TSX Venture Tech Stock you haven't heard of or HERE to become a member of PinnacleDigest.com to receive reports like this one, once per week via email.

POET Technologies (PTK:TSXV) is struggling to find its groove and true market value after announcing avaluation report and model indicating fair market value of its key subject property of as high as $4.2 billion. With a market cap of just under $200 million, the company’s management was likely trying to document the potential of its intellectual property in the current marketplace.

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.

Key fact: Pellegrino and Associates has been around since 2003 and has developed a client base around the world.

More on this incredibly bold press release shortly.

It is important to note that the volatility and incredible price swings in POET Technologies' market hasattracted momentum traders and retail investors looking for that next pop. While this volatility is coveted and sought after by every company on the TSX Venture it can lead to exaggerated movements and heightened speculation.

For whatever reason, POET's market failed to react to the valuation report that suggested the potential market for its leading technology could be in excess of $4.2 billion.

POET Technologies - 3 Month Chart

POET's market cap was above $400 million earlier in the year, but hovered below $200 million on August 15th at roughly $194.89 million.

Speculation has continued to surface over why Pinetree's Founder and Chairman, Sheldon Inwentash, let go of 1 million shares on August 1st and 5th.

The sales took place at $1.42 (500,000) and $1.34 (500,000) per share.

Pinnacle has highlighted his and Pinetree's insider buying for months.

Sheldon's buying patterns were 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.

The valuation has thrilled many investors, but left many retail investors with more questions than they had before as the stock moves lower. Perhaps, like all things, investors were expecting and hoping for more. 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 an incredible finding for any 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 also has investors excitedly speculating about the company's future prospects.

Mr. Manocha was most recently CEO of GlobalFoundries, the second-largest semiconductor foundry in the world. POET will have to start expanding its brand via mergers and acquisitions and other collaborative partnerships to ensure it is progressing towards revenue and the actualization of its technology.

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, speculation and hype can only carry a stock so high before serious investors demand revenue. Ironically, sometimes that can be too late. Just ask the investors who bought POET below $0.40 in late 2013.