Serenity remains heavily invested in AAOI, but the timing of its $600 million at-the-market offering is unfavorable. Production constraints and demand visibility underpin its holding stance.

Serenity remains bullish on optical communications stock Applied Optoelectronics (AAOI) but criticized the company’s at-the-market (ATM) equity financing. “We dislike AAOI’s over-reliance on ATM offerings, a principle that applied equally to IREN and POET before, and we will not treat AAOI differently,” the firm stated. Its sharpest criticism centers on timing: the roughly $600 million ATM should have been launched after the completion of 1.6T optical module qualification, a milestone expected in the coming weeks, or structured as convertible bonds priced above market value. Instead, the company rolled out the offering after its share price dropped from $220 to $130, and every subsequent use of the ATM will trigger short-term structural selling pressure and sustained stock price suppression. Serenity explained its core rationale for maintaining a heavy position in AAOI: the firm faces capacity constraints while demand visibility is very high, making AAOI more attractive than POET. “Investors can hold AAOI’s stock long-term without supporting every business decision of its management,” it said. “You can absolutely criticize the management’s financing pace while still holding its stock based on the supply-demand structure.” AAOI reported 86% year-on-year revenue growth in the second quarter, beating expectations, but its third-quarter guidance was weak. The latest ATM offering has further amplified market concerns over short-term valuation and liquidity.