ZimZim: When there is such a disconnect between stock price and business potential, managements words and actions, it's hard not to be really concerned.  FJ?  Rainer? Mazann? Etc?

I hope that after this week’s share price increase, your concerns have diminished a little. On the other hand, it must be noted that for most investors POET is not worth a second look simply because the company is not making money.

Revenue is extremely important now. As soon as POET makes its first “real” sales, this will attract the attention of some investors. Additional investors will enter when revenue and profit develop positively over several quarters and – later – over several years.

An entry barrier is the low market capitalization and the low trading volume. It is difficult to build up a large position in POET shares and also to liquidate it later without significantly impacting the market – and always in the “wrong” direction from the buyer’s resp. seller’s point of view. (Sidenote: The sheer number of available shares is irrelevant to this. After all, it doesn’t matter if I buy ten shares at $5 or 100 shares at $0.5 – it’s the market capitalization that matters).

Institutional investor interest could also be better. Institutional investor interest breeds institutional investor interest. It’s a vicious cycle: market capitalization and trading volume are low, so institutional investors don’t get in. Institutional investors don’t get in, so market capitalization and trading volume are low.

So it comes down to individual institutional investors breaking this vicious cycle and buying “anyway”, and small positions at first. We’re already seeing that to a little extend. These few institutionals are buying either because they (like us) expect revenues soon or because they (at a later point in time) see those revenues on the books. And the more POET’s sales and profits become settled, i.e., from quarter to quarter and from year to year, the more investor interest and share price will rise, and thus market capitalization, trading volume and institutional investor interest.

In other words, the whole thing doesn’t happen overnight, but develops over a certain period of time. (By this, I do not want to exclude strong share price fluctuations in both directions – on the contrary!)

So the critical factor is revenue (and, of course, profit). And the best thing management can do is to ensure that these revenues start flowing in as quickly and as extensively as possible, and that the company remains financially sound until then. My understanding is that they are doing just that.

(I would have liked to change the title of this post, but Agroracom wouldn’t let me.)