Poet Technologies (NASDAQ: POET) stock is seeing an explosive rally in Monday’s trading. The optical-technologies company’s share price was up 17.6% as of 1:10 p.m. ET and had been up as much as 29.2% earlier in the day.
Poet’s valuation is roaring higher today in response to expectations that the company is poised to make moves that will reduce exposure to adverse tax impacts for its shareholders. With today’s rally, the stock is now up roughly 35% year to date.
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Last week, Wolfpack Research published a short sell report on Poet Technologies stating that the Toronto-headquartered company’s move to build a large cash balance sheet could create tax problems for U.S. shareholders. In turn, Poet responded and said that it would provide information that would allow U.S. shareholders to make a qualified-electing-fund (QEF) election that would allow U.S. shareholders to avoid complications created by the company’s status as a Passive Foreign Investment Company (PFIC).
Poet Technologies says that it expects that it will no longer be characterized as a PFIC this year, which suggests that the company could use much of the cash pile it’s built up. The company also says that it plans to change its headquarters to a U.S. location this year, so it seems very likely it will be able to avoid the PFIC designation going forward.
While the company’s outlook in the optical technologies market for artificial intelligence (AI) remains speculative, comments from management suggest that the business could see a substantial revenue ramp this year. With the company valued at roughly $1.3 billion and trading at approximately 130 times this year’s expected sales, Poet is a risky stock — but there is big upside potential if AI-related demand for its optical tech proves to be strong.
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