POET Technologies About To Move From  Stealth Mode To Wealth Mode

Jun. 23, 2015 12:33 PM ET

Summary

Poet Technologies is moving from developmental to commercial stage, with two industry driven milestone devices that validate its technology due to be completed this month.

Vast improvements in semiconductor performance and power savings will drive licensing and partnerships in virtually all CMOS verticals.

In combination with a planned move to the Nasdaq, these catalysts create opportunities for substantial gains in the near term and long term.

POET's III-V technology is CMOS friendly and can be deployed to current silicon foundries, saving billions in capital expenditures by extending their usefulness by years.

Introduction

POET Technologies (OTCQX:POETF) utilizes gallium arsenide (GaAs) semiconductor fabrication processes never before achieved to deliver much higher chip performance (up to 10x), significantly lower power usage as well as multifunctional capabilities on a single chip, including universal memory, electrical and optical functionality. Simply stated, the step function advancements will change the semiconductor industry, which is struggling with yields and delays at advanced nodes, along with rapidly accelerating capital and per unit costs at lower nodes.

The potential is for POET to be both complementary and disruptive to the $600 billion semiconductor industry. It's an elegant solution to the growing complexities associated with improvement within standalone silicon-based semiconductors. POET's processes can be readily introduced to current silicon CMOS fabs, saving companies tens of millions of dollars in retooling, upgrades and R&D.

A Planned Nasdaq Listing

As a Canadian company, access to POET's shares is largely restricted to individual investors and Canadian investment firms, and the current share price ($1.25 US) and market cap (approximately $220 million) reflects this lack of visibility to American investors.

During their presentation at the City Investors Circle in February 2015 in London, then CEO, now co-Executive Vice Chairman Peter Copetti stated, "We are also going to be planning a Nasdaq listing in June, and I would never go, with my capital markets experience, I would never go to the Nasdaq unless I had real partnerships in place. I think we are just in the right time and place for POET and we are really excited about it." He added, "Because when you decide to list to the Nasdaq, you have to have a run-up to the Nasdaq, then you have to have coverage, and then you have to have news afterwards. We have to make sure that we have all those things in place if were are doing it. Now we feel we do."

POET is currently running TV ads on business channels in the US to increase visibility. As there are not yet specific devices commercially available, these ads appear to correlate with their intent to create market awareness during the run-up to a Nasdaq listing.

In order to achieve and maintain a stable share price adequate for listing, tangible evidence of POET's capabilities will likely be required. POET anticipates the completion of two key semiconductor devices that provide independent validation no later than the end of this quarter. Positive results will likely spur a flurry of potential partnerships and licensing agreement negotiations. Such activity should favorably impact the current share price and facilitate an uplisting.

The Opportunity

While POET's listing would have many characteristics of an IPO, it becomes the initial chance for US institutional investors to secure positions in the company. A marketing campaign will likely precede the listing to pique interest. "First day listed" demand for shares will drive interest and attention well beyond that seen in normal day-to-day trading as POET is introduced to the US investment community on an unprecedented scale. Early participants may benefit from the confluence of demand, marketing and announcement of material events required for a successful listing.

Evidence of Commercialization and the Power of Four

The establishment of a Technology Roadmap Advisory Board (TRAB), whose mandate is specifically to guide commercialization of the POET process, serves as an initial point supporting both validation and the move toward monetization.

Further evidence of a bullish outlook is the fact that the company recently eliminated their option for a 5:1 reverse split which was in effect after their August 2014 annual group meeting and replaced it with an option to execute a 3:1 reverse split. This option by itself would not drive the stock price to a desirable and stable level to ensure the listing. It is clear that other catalysts are anticipated and the 3:1 option is to be utilized only if these events do not sufficiently drive share price higher organically. It is a statement of confidence not previously seen.

The most objective and critical evidence of market readiness are the decisions of three industry leading semiconductor scientists/executives to join with Dr. Geoffrey Taylor, the inventor of the POET (Planar Opto Electronic Technology) Process and an expert in GaAs semiconductor technology; Dr. Ajit Manocha, Co-Executive Vice Chairman, former CEO of Global Foundries, and member of President Obama's Advanced Manufacturing Partnership Steering Committee; Dr. Sukesh Venkatesan, CEO, formerly Senior Vice President of Technology Development for GlobalFoundries; and Dr. Subhash Deshmukh, COO, former VP Emerging Technologies and Products, Applied Materials. The CEO and COO assumed their responsibilities two weeks ago. These four highly respected and experienced individuals have produced scores of patents in their 100-plus years of high-level semiconductor development experience and achievement.

Professionals of their caliber simply do not leave leadership roles at multi-billion corporations for a tiny developmental tech firm on a whim. They do so only to pursue career-defining opportunities in their distinguished careers. For them it appears POET may represent that opportunity.

Risks

Companies in developmental stages seldom produce revenue and almost always face the risk of capital exhaustion prior to achievement of their goals. POET has managed their capital in outstanding fashion, and, at last report, had nearly $15 million in cash and a burn rate of less than $500,000 per month. While expenses are likely to increase with the addition of top level executives, cash to continue operations should extend well into 2016, and with revenue generation projected to commence this year, potential capital concerns are minimal.

Delays in the completion of their milestone devices may impact other activities, including an application for a Nasdaq listing. However, the decisions of the new CEO and COO to accept their roles point to the likelihood that these milestones are at or near completion.

POET's technology may not only compliment existing fabrication processes, it could be seen to displace current CMOS technology as it evolves. It is likely that established industry leaders that have sought to perfect their processes over decades, at incurred development costs in the hundreds of billions of dollars, continue to improve their products. History describes attempts at industry disruptive achievements as rarely successful due to the enormous advantages of time, resources, and capital available to the established leaders in any industry. POET will need to overcome such historical barriers to succeed.

Semiconductor behemoths Intel (NASDAQ:INTC) and Samsung (OTC:SSNLF), along with third-party fabricators such as Taiwan Semiconductor (NYSE:TSM), relentlessly press forward with current frontiers at 14nm and 10nm, with increasing chip complexities including 3D being successfully developed. While each of these companies is encountering difficulties and delays of their own, the possibility exists that one or more of these companies will develop new technologies that may rival POET's monolithic III-V process. Further, POET could encounter difficulties and/or delays in their "lab to fab" transition currently in progress with BAE Systems. These must remain considerations in any prospective investors risk/reward analysis.

Summation

"Stealth mode" is an intentional strategy employed by developmental companies to advance products to commercialization by maintaining an extremely low profile, thereby reducing potential for duplication or intervention by their potential competitors. POET's recent media activity appears to signal the completion of stealth mode and the initiation of commercialization efforts.

The recent acquisition of industry leading executive talent, the imminent completion of key devices demonstrating the power of POET's technology, and the planned uplisting to the Nasdaq create a rare and compelling proposition for individual investors to gain an early entry into a revolutionary semiconductor technology and participate in the move from stealth mode to wealth mode.

As one of their advertisements states: "One company is changing the foundation of electronics." Should their plans succeed, it could change the foundation of many investment portfolios as well.

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