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Investors weren't liking what they saw with opto-electronics component specialist Poet Technologies' (POET 8.49%) stock on the second trading day of the week. A highly critical, scathing report from a short-seller firm dampened sentiment on the company to the point where its shares closed the day 8% lower.
Harsh allegationsThat morning, Wolfpack Research divulged a short position in Poet, and wasn't shy to enumerate the reasons why. In a note published on its website, the firm digested these in a headline bluntly titled "We Believe Poet Is a[n] Obvious Stock Promote, Has Created an IRS NightMare: U.S. Holders Have Until April 15 to Act."
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Wolfpack accused management of putting the company "on a collision course" with the federal tax authority by accumulating massive amounts of cash through its frequent issuing of new shares. It added that this could have significant financial implications for its stockholders, hence the advice to exit the stock before the IRS's tax filing deadline.
On top of that, according to the short-seller, Poet has "continuously" pivoted its business from one type to another, with little success. It said the company has earned only $2.3 million since 2020.
As of late afternoon Tuesday, Poet had not officially commented on Wolfpack's report.
Today's Change
(-8.49%) $-0.62
Current Price
$6.68
The influence of influencersThe ten-page document was loaded with these and other incendiary accusations, including one in which Wolfpack alleges that Poet paid online "influencers" to promote its stock as a buy.
In one specific example, it stated that the company handed $95,000 to a Canada-based entity called LFG Equities to draft two YouTube stock pickers with significant followings. This pair was apparently paid to flag Poet stock as a "hidden gem" to their audience.
While Wolfpack has a clear interest in turning market sentiment negative on Poet, as investors, we have to take such accusations seriously. Investors were right to err on the side of caution and unload their stock. We should now watch for how -- and if -- Poet eventually responds to this research.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.