The great betrayal?
Why did Marvell really send POET to the unemployment office?
The market is in complete shock from the almost 50% crash in POET stock last week - but if you look between the lines, you'll understand that the writing was on the wall in blood...
$POET stock rose by about 220% from the end of March until last week
This rise was driven by a general rally in optical communications stocks, with POET benefiting particularly due to a huge contract it had with Celesta AI, a company acquired by chip giant Marvell
Investors' great optimism stemmed from the direct connection between Marvell and Google - with Marvell emerging as a primary supplier of optical communication components for Google - which was expected to open the door for POET to orders on the scale of a hyperscaler like Google
POET - which currently does not yet enjoy revenue or profits, and mainly burns cash, exceeded a market cap of $1 billion due to these expectations
One could perhaps debate whether this valuation was reasonable or not - but it is no longer relevant, as last week before the market open, Marvell announced the cancellation of all transactions with POET due to "breach of contract confidentiality"
Marvell claims that the CFO disclosed confidential contract details in a public podcast - which led to further increases in POET stock - and it finds grounds in this for a complete cancellation of all contracts
But while naive investors believe Marvell that the reason for this ugly divorce is a CFO's slip of the tongue in an interview, the reality may be much colder and more calculated.
Understand, in the chip industry, you don't discard a Tier-1 partnership due to "chatter" if the product is critical.
To us, it seems that the breach of the confidentiality agreement was just a legal backdoor - a convenient excuse to exit the contract without paying huge penalties.
So what is the real reason for Marvell's aggressive move?
Meet the Swiss romance that eliminated POET
The real reason for POET's demise occurred last week under the radar.
On April 22, just one day before sending the cancellation notice to POET, Marvell announced the acquisition of Swiss company Polariton Technologies.
Polariton doesn't do exactly what POET does, but it makes POET's role in Marvell's technology stack completely redundant.
POET (optical packaging platform) is a type of "motherboard" that allows various optical components to be integrated onto a single chip - a brilliant product with a registered patent.
Polariton (plasmonics), on the other hand, produces the world's fastest modulators, which are 10 times smaller and significantly faster than traditional silicon photonics.
The meaning is clear, Marvell no longer needs POET's "motherboard" because it simply bought the "engine".
By acquiring Polariton, Marvell can embed optics directly into its digital signal processors, bypassing POET's architecture.
This is vertical integration at its best - the giant prefers to own the intellectual property rather than pay royalties to a micro-cap player.
If you thought that was all - and perhaps the drop was too sharp - maybe you should think again
Why?
Because it seems POET's management is playing hide-and-seek
What should really bother you are the reporting timelines.
The cancellation notice was received on Thursday (April 23).
The company remained conspicuously silent throughout Friday (April 24), which allowed the stock to jump 29% amid FOMO and rumors.
The news was only published on Monday (April 27) before the market open.
Hiding such a material event for four days is not just unprofessional, it's unacceptable
This move may destroy trust much more than the loss of a single contract.
The market hates surprises, and it hates even more managements that let it dance on the edge while the house burns.
The report of a new POET order - a sad joke
The latest report of a new $5 million order from another client feels like a desperate attempt at firefighting.
Compared to the planned scale of the partnership with Marvell and Celesta AI, $5 million is a drop in the ocean.
This looks more like a PR distraction from the fire raging in the boardroom.
POET's technology may still be brilliant, but now a new problem has emerged
The market now understands that POET is cornered, which significantly weakens their bargaining power.
The investment thesis based on a "partnership with a giant" has officially evaporated. One can continue to monitor the stock's capitulation levels, but for us at least, trust in management is currently close to zero.
$POET stock is not under our coverage
We couldn't end this post without talking about the life lesson that can be learned from POET's case
The stock, which rose hundreds of percent in the last month - fell 60% from its annual high in one day
Whoever bought out of FOMO somewhere at the top - lost more than half of their capital within hours
Don't act out of emotion - what goes up can come down -
We wish you only good