Shares of Lightwave Logic (NASDAQ:LWLG) plunged as much as 15% lower following a short report from Kerrisdale Capital. Kerrisdale, led by its founder Sahm Adrangi, is a hedge fund with over $550 million in assets under management.
In the report, Kerrisdale believes that Lightwave has been stuck in a “development stage” for more than thirty years. However, the company claims that its products will enable optical communication speeds that are two to three times greater than current industry standards. The short-seller believes this is a lie.
Since its initial public offering (IPO) 15 years ago, Kerrisdale points out that Lightwave has only generated about $6,000 in revenue. Despite “prototype completions, product tests, and patents over that time,” the company has yet to release a single commercial product. In addition, the hedge fund was unable to find any of the the company’s technological innovations in industry scientific journals.
With that in mind, let’s jump into the details of the report.
Kerrisdale Capital Releases Short Report on LWLG Stock
- Kerrisdale mentions that competitors of Lightwave boast much greater bandwidth capabilities.
- The supposed bandwidth capabilities of Lightwave’s stand-alone prototype modulator enable lower data transmission speeds than those that have been achieved by legacy transceivers.
- On top of that, the fund says that “the most damning detail” it discovered about the company’s commercialization efforts is that no one knows how to consistently produce its proprietary polymer.
- Based on discussions with former Lightwave engineers, Kerrisdale believes that Lightwave’s final product is “unstable.”
- The firm also mentions that the final product’s “molecular orientation decays over time, dissipating its unique properties.”
- As a result, even the “mediocre devices” that Lightwave has built are one-off products that can’t be “replicated systematically.”
- Meanwhile, Kerrisdale believes that LWLG stock’s appreciation over the years is due to the company’s retail fanbase.
- On InvestorsHub, there are tens of thousands of messages from investors praising the company’s potential.
- The firm adds that CEO Michael Lebby has created a narrative that’s “just believable enough to retail investors.”
- In a tweet, Kerrisdale quips that it doesn’t believe Lightwave will ever commercialize a single product. Furthermore, it believes that the stock will return to its former penny-stock status.
- The hedge fund has disclosed that it short shares of LWLG stock.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.