POET Technologies buys Indium Phosphide Photonic Devices from Dense Light.
POET Technologies is issuing a C$14 million convertible debenture to bridge the C$34.5-40 million cash sale of its manufacturing plant for Indium Phosphide (InP) photonic devices, DenseLight. The DenseLight sale is planning to close in October 2019. The convertible debenture pays 1% each month (12% annually) and converts into Units at C$0.40 (consisting of one common share and one warrant). Details of the convertible debenture are in the attached term sheet.
POET is an innovator in chip-scale integration of photonics products for the sensing, data communications and telecommunications markets. POET has developed the Optical Interposer, a technology which utilizes novel dielectric waveguides that allow the integration of electronic and photonic devices into the same chip-scale package. This integration allows for dramatic cost reduction (reduces transceiver Bill of Materials (BOM) cost by up to 50%) and is a long-standing industry need. POET is the only company to introduce true chip-scale integration and wafer scale assembly and test of photonics devices that are flexible and scalable.
POET is at an inflection point for rapid growth. In November 2018, POET received its first orders to evaluate the Optical Interposer from leading global networking companies and has a 2019 revenue guidance of US $8-10 million. 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.
The sale of DenseLight will transform POET’s balance sheet and consequently allow the company to pursue a fab-light strategy, which involves a less capital-intensive business model and focuses 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.
