Mark: IBK Capital is a Toronto based independent and privately owned investment banking firm. IBK offers a full range of financial services such as private placements of equity and debt, going public by way of reverse takeover, merger, acquisition, as well as divestiture and advisory services. We were pleased to have president and CEO Michael White back in the studio where he gave us an update on his previous stock picks and a reintroduction for the benefit of new viewers.
Michael: Thanks, Mark. It’s nice to be back on Small Cap Power. I will add that IBK Capital is celebrating its 25th anniversary. We’re very proud of our track record having raised $800 million for junior and micro cap companies. We’ve also played a role in transactions valued at over $5.6 billion.
Mark: When you last spoke with us back in October 2013, you mentioned that you liked a company called POET Technologies (TSXV: PTK) when it was at 33 cents. Can we get an update?
Michael: Yes. POET, PTK, trades on the Venture exchange. We still like it a lot and we still own it.
POET recently announced that it will have a process designed toolkit for its 40 nanometer gallium arsenide chip technology by the end of this year that will compete with best of class in silicon semiconductor. It will behave like a 14 nanometer chip in terms of its speed and a 22 nanometer chip in terms of its power efficiency. Taiwan Semiconductor Manufacturing Company, TSMC, recently announced that it is spending $10 billion to build out capacity to produce their 16 nanometer chip, and POET will be able to, or customers that want to use POET’s chip should be able to manufacture 40 nanometer gallium arsenide chips for a fraction of the cost. We estimate that it would probably be in the order of tens of millions of dollars and not billions of dollars, as with silicon.
This really allows a leapfrog, if you will, of POET’s technology into the forefront of what is being manufactured in the silicon space today. That’s very important in the hot market that we have right now for tablets and smart phones.
Also, one other thing I’d like to add is that recently Ajit Manocha joined POET. He was formerly the CEO of Global Foundries. While at Global Foundries, he built that company up from one customer to hundreds of customers and that company is now the second largest foundry in the world. We’re very excited to have Ajit aboard with POET, and we expect that he will drive this company towards customers and towards revenue.
Mark: Why do you think the Venture exchange stocks have been so weak lately?
Michael: The Venture market began to sell off about three years ago and was skipping along the bottom over the course of the last year with modest gains. Unfortunately, we had a correction in the broader market, and when the broader market corrects then the Venture really suffers. That’s due to the liquidity issues or the lack of liquidity in the Venture market.
We think, though, that the broader market will continue to trend upwards. We think that it was a minor correction, and because of that the Venture exchange should perform well from here. We’re calling this the bottom of the Venture exchange, and we expect higher prices in the future.
Mark: You’re known to like gold and certain gold related stocks. Why do you think that the gold price has performed so poorly during the past three years?
Michael: Going back further than three years, of course gold performed very, very well. We had gold that was rising and continued to rise over the course of about a decade.
When the financial crisis occurred back in 2008, there were quite a bit of forces, if you will, that helped to propel gold even higher. When those forces abated and pulled back as the world started to become organized again, and as the crisis started to fade, at least the immediacy of the crisis faded, then gold pulled back. We’ve had now a couple of years with gold having sold off but now trying to find a place between, say, $1200 and $1400 an ounce. That’s the environment that we’re in today.
Mark: Do you see gold stocks recovering any time soon?
Michael: Yes, indeed I do. That is something that we are absolutely sure of. It’s not a matter of if, it’s a matter of when. Gold stocks are cyclical stocks. They go up, they go down, and they go back up again. We can’t say with absolutely certainty as to when they might go up, but we do know that they will turn and they will perform again. We’re taking advantage of this situation and certainly looking at gold stocks out there right now that we can buy at a very, very low price, discounted price, discounted market price to their fundamental value, then just wait for the performance to return.
Mark: Thanks for today’s interview, Mike.
Michael: Thanks.
