We are short shares of Lightwave Logic, a $900 million “electro-optic photonic device” company that has been perpetually stuck in “development stage” status for more than thirty years. The company’s stock price rose by 10x in June of last year, in tandem with some well-timed investment conference presentations, excitable message board postings from long-suffering shareholders, and an extremely favorable environment for retail-driven stock frenzies. Since then, Lightwave has been able to maintain at least some of those gains through a NASDAQ uplisting and a steady stream of optimistic press releases touting supposedly successful product tests and patent issuances.

Underneath the façade of accomplishment, though, is almost nothing of substance. Lightwave claims its “products” will enable optical communications speeds 2-3x the current industry standards using a fraction of the power. But Lightwave hasn’t ever come close to commercializing anything: in the 15 years since it’s gone public, it has generated a total of about $6 thousand in revenues, which stands in stark contrast to the steady stream of promotional announcements celebrating overhyped prototype completions, product tests, and patents over that time. Somehow, success in the lab – none of which we could find reviewed or published in any of the industry’s scientific journals – hasn’t translated into a single commercial product.

In the same vein, the device specs that Lightwave ambiguously discloses in its announcements and presentations are just not very impressive. The supposed bandwidth capabilities of its stand-alone prototype modulator enable data transmission speeds that are lower than those that have been achieved by entire transceivers (a much higher hurdle) from prominent industry players like Acacia and Infinera. Furthermore, while Lightwave frequently points out that polymer-based modulators would consume a fraction of the power that standard modulators do, this is completely irrelevant because modulation accounts for less than 5% of the power consumption of a typical transceiver. In other words, even if Lightwave had a marketable product, it would be inferior to what is already manufactured in much smaller physical size and at much larger industry scale.

But the most damning detail we discovered about Lightwave’s commercialization efforts is that no one knows how to consistently produce its proprietary polymer. The process of engineering an electro-optic polymer requires the electrical poling of the material in order to freeze its molecular orientation. Based on discussions with engineers formerly at Lightwave, the poling process has been plagued by unpredictable electrical shorts, which decimate manufacturing yields; inconsistent and heterogeneous outcomes within and among the fabricated polymer sheets, which prevent any product standardization; and an unstable final product whose molecular orientation decays over time, dissipating its unique properties. The implication is that even the mediocre devices Lightwave says it has built and tested are one-off productions that can’t be replicated systematically.

The sustainability of the spectacle at Lightwave owes a lot to CEO Michael Lebby and the almost blind faith in him shown by the company’s fanatical retail investor base. That faith has been publicly displayed in tens of thousands of InvestorsHub message board posts, where devoted shareholders fervently quote Lebby’s speed/power evangelism as confirmation of the company’s greatness. We think Lebby has tailored a narrative that’s just believable enough to naïve investors, but that falls apart when viewed in the context of the underlying trends in photonics. The company’s grandiose claims about its technology will have turned out to be little more than an optical illusion.

Read our full report here.