In 2023, Lightwave Logic (NASDAQ:LWLG) faces a pivotal period that will determine its future success. As a company operating in the field of material science and connectivity, LWLG holds intriguing technology. However, the lack of commercial results has been a persistent challenge. The company is currently showcasing its technology to foundries, with the goal of licensing it to OEMs and adopting a capital-lite business model as a technology licensor. The upcoming year will be crucial for LWLG, not only in terms of commercialization timelines but also in relation to the capital market environment for early-stage businesses.
One of the key concerns is LWLG’s cash burn and its impact on capital markets. With an annual cash burn of approximately $10 million and a cash balance of $25 million, the company faces the need to dilute shares by 2% each year. The current stock price decline of 50% adds further complexity, potentially leading to higher dilution rates. If the price remains depressed, dilution rates could even reach 5% per year. This scenario highlights the challenge of reflexivity, where stock price decreases can perpetuate a cycle of lower prices and higher dilution.
Looking ahead, LWLG will need to allocate more resources to marketing and pitching its technology to manufacturers. These efforts, expected to commence in 2024, will require time and perseverance. Additionally, LWLG may face obstacles in countries like Japan, where corporate culture tends to move slowly. Moreover, the recent turmoil surrounding SVB Financial’s blowup has resulted in a tighter credit market, impacting both venture debt and equity. Public markets have become increasingly hostile towards pre-revenue and early-stage companies, making it more challenging for investments like LWLG to thrive.
While LWLG’s technology and commercial model hold promise, the company must navigate the challenges of raising capital, increasing overhead costs, and facing potential dilution. Shareholders must place their hope in successful commercialization aligned with management’s plans. Although the total addressable market (TAM) is substantial, current shareholders should carefully evaluate the potential risks and rewards associated with investing in LWLG at its current stage.
