POET Stock Tumbles Nearly 10% On Wolfpack Research's Stock Promotion Allegations: Retail Dismisses Report

• The short seller’s report alleged that POET could qualify as a Passive Foreign Investment Company due to its cash accumulation through dilution and limited operating revenue. 
• It also alleged that POET may be downplaying PFIC risks, warning investors that if they failed to file the right forms by April 15, they could face serious tax consequences from the IRS. 
• Wolfpack Research also criticized the company for its allegedly seventh business pivot this decade.

Shares of POET Technologies Inc. (POET) tumbled nearly 10% on Tuesday on a report from Wolfpack Research in which the firm disclosed a short position in the company.

The short seller raised potential concerns over tax implications for shareholders, while also questioning the numerous business pivots that POET has made during its lifetime.

“POET has all the hallmarks of a classic stock promote,” the report said.

What Is Wolfpack Research Alleging?

The short seller’s report alleges that POET could qualify as a Passive Foreign Investment Company (PFIC), due to its cash accumulation through dilution and limited operating revenue. This would expose U.S. investors to complex IRS compliance requirements and punitive tax rates, including high marginal rates and compounding interest.

The report also alleged that POET may be downplaying PFIC risks, warning investors that if they relied on the company’s opinion and failed to file the right forms by April 15, they could face serious tax consequences from the IRS.

Wolfpack also argued that POET has generated operating revenue since 2020 that is “less than a grimy Pizza Hut,” but has raised substantial capital through share dilution, noting a 303% increase in shares outstanding in over three years.

The report also criticized POET for its frequent pivots amid limited commercial success. Additionally, it claimed the company hired external firms to coordinate investor outreach to promote the stock as a “hidden gem,” and also undertake discounted share placements.

What Is POET?

POET Technologies is a Toronto-based company that creates high-speed optical engines, light source products, and custom optical modules for artificial intelligence companies and hyperscale data centers.

The company started out in the solar space, before pivoting to photonics, and eventually a key AI optical player at present, according to an earlier interview with CEO Suresh Venkatesan.

Wolfpack Research, in its latest report, alleged that POET is currently on its seventh business pivot this decade.

What Are Stocktwits Users Saying?

On Stocktwits, retail sentiment around POET stock improved from ‘bullish’ to ‘extremely bullish’ over the past 24 hours, while message volumes increased from ‘normal’ to ‘high’ levels.

One bullish user dismissed the report, noting that the short seller did not speak about the company’s partners and potential upcoming orders in the report.

Another user expressed optimism that the management of the company would provide a satisfying response to the report by releasing positive company news soon.

POET stock has gained more than 73% in the past year.

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