My impression is that the assessment of this sale is developing somewhat similarly to the assessment that followed the announcement of the intention to sell earlier this year.

Our first impression back then was negative (“What? POET selling their core asset?”), but then it slowly turned into the positive, and we began to understand the merits of that sale.

Now again the first impression is negative (“What? China? And a totally unknown buyer?”), but I guess we will also see the merits soon. I especially like the train of thought that this consortium has been especially set up a) to benefit from the OI and b) to address the huge Chinese market. The buyer is putting a lot of skin into the game, so they must be very optimistic about the future prospects.

IBK Capital is also optimistic. They just sent around the following evaluation, and I think it is okay to share it here:

It is important to note that the sale of DenseLight represents an injection of US$28 million into POET and a significant reduction of POET’s operating costs which will transform POET’s balance sheet and enable the company to pursue a fab-light strategy.  As part of the fab-light strategy, POET will focus on growing the Optical Interposer business in fast-growth, multi-billion dollar markets driven by internet traffic, datacenter development, 5G networks and the integration of photonics and network switching devices.

POET is at an inflection point for rapid growth.  POET has a 2019 revenue guidance of US $8-10 million and IBK Capital Corp. expects POET’s annual revenue from its Optical Interposer-based Optical Engines for various applications to exceed US $200 million (C$267 million) for 2023—which is more than 20x 2019 revenue. 

This revenue growth is also supported by the cumulative Total Available Market (TAM) POET is pursuing for integrated photonics, which is estimated at US $19 billion for 2019-2023.  System integrators such as CISCO and Broadcom, and data center providers such as Microsoft, Facebook, Google and Amazon represent about 70% of this total market.  POET’s revenue growth and industry-wide market growth should provide POET with significant share price appreciation.