POET Technologies (NASDAQ: POET) is ripping higher this morning after responding swiftly to a short-seller report that alleged it’s an “obvious stock promote” designed to enrich insiders while leaving retail investors with a “tax nightmare.”
According to Wolfpack Research – the firm behind the hit piece – POET’s financial structure will trigger severe IRS penalties for US shareholders due to its status as a Passive Foreign Investment Company (PFIC).
Plus, the report accused POET of paying “influencers” nearly $100,000 to tout its stock and argued the company has continuously pivoted its business model with negligible revenue to show for it.
Still, including today’s gains, POET Technologies shares are up some 80% versus their year-to-date low.
Why management’s response helped POET stock rally
Investors are cheering POET stock on Apr. 20 because the firm’s management didn’t just deny the allegations – they actually provided a structural solution as well.
To alleviate concerns regarding the dreaded PFIC status, the company revealed its formal intention to redomicile in the US, effectively eliminating the foreign corporation tag that underpins this risk.
Additionally, CFO Thomas Mika clarified that POET Technologies will provide the necessary data for shareholders to make a “Qualified Electing Fund” (QEF) election for the 2025 tax year.
This will significantly mitigate potential adverse tax consequences.
All in all, POET’s proactive stance has effectively neutralized the IRS nightmare narrative, shifting investor focus back to the company’s technological milestones.
The bull case for POET Technologies shares
Despite Wolfpack allegations, POET Technologies stock may be worth owning into strength today – at least for risk-tolerant long-term investors.
While the short-seller highlighted a lack of historical revenue, it arguably ignored the “forward-looking” nature of the semiconductor industry.
POET is currently transitioning from a pure R&D play to a commercial entity, recently securing a $5 million production order and boasting a cash reserve of over $430 million.
Meanwhile, the partnerships with heavyweights like Foxconn and Mitsubishi suggest that POET’s “Optical Interposer” technology is already receiving validation from industry leaders.
In summary, today’s price action suggests the market views Wolfpack’s report as a “bear raid” on a company that has finally de-risked its balance sheet and tax profile.
Where options data suggests POET is headed next
Even from a technical perspective, POET shares look poised for continued momentum ahead.
The stock has decisively broken above its major moving averages (MAs), with a relative strength index (RSI) in the late 60s indicating it hasn’t yet stepped into the “overbought” territory.
Additionally, the put-to-call ratio on options contracts expiring mid-July sits at 0.09 only, signaling a strong bullish skew – with the upper price on those contracts indicating potential upside to $11.65.
At POET’s annual meeting on June 26th, all eyes will now be on the formal vote to redomicile – a move that may prove the final catalyst for it to shed the lingering speculative label for good.
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