Here’s a Wall Street Journal article on the history of moissanite (circa 1997, or before advertising really went into high gear).
Analysts Wait to See If C3’s Fake Gems Pan Out
CARRICK MOLLENKAMP | Staff Reporter of THE WALL STREET JOURNAL
Two North Carolina brothers and their companies are discovering that creating fake diamonds can be as difficult as mining the real thing.
One company, C3, of Morrisville near Research Triangle Park, went public in November with the mission of turning a lab-created mineral called moissanite into brilliant and inexpensive gems resembling diamonds. The other firm, Cree Research, a more established Durham-based semiconductor-material maker, produces the material that is the basis for moissanite.
The companies are run by brothers Jeff Hunter, 40 years old, president of C3, and Neal Hunter, 35, Cree Research CEO.
Cree Research Inc.Business: Maker of semiconductor materialSix months (Dec. 28) 1997 1996Revenue:$20,313,000$13,528,000Net Income:2,640,0002,264,000 Per-share earnings:0.20.17Second quarter Per-share earnings:0.110.03
But their efforts to bring synthetic moissanite gems to market have hit a few snags. . A gem expert at a jewelry-industry trade group who examined 23 gems provided by C3 says they were grayish and fuzzy. Meanwhile, Cree researchers have fallen behind schedule in producing material that would allow C3 to consistently make higher-clarity gems.
When the company learned of the gem expert’s reviews, it hustled an improved version of the stone to three Atlanta jewelry stores, where jewelers opined that C3’s gems looked like diamonds.
And Cree Research, with an 11-year track record in the fast-moving semiconductor industry, is confident it can solve the production delays.
Still, the early problems illustrate the pitfalls of trying to create a product and introduce it in a tough market. Despite a marketing blitz through outlets such as Home Shopping Network, for more than 20 years the best-known pseudo-diamond, cubic zirconia, claims a scant portion of U.S. diamond sales, which reached $18 billion in 1997.
The Hunter brothers believe their diamond substitute — which they say will be higher in quality, and price, than cubic zirconia — will tap a lucrative market among buyers looking for diamond lookalikes at a tenth of what a diamond would cost.
Neal and Jeff Hunter, along with a third brother, Eric, pursued the possibility of creating a fake diamond in 1995 when they noticed that material Cree was making resembled emeralds. More tinkering in Cree’s lab resulted in a material with the same properties as moissanite.
Cree’s work in semiconductor materials includes the development of a high-tech blue laser capable of boosting storage on CD-ROMs, and separately, making products such as light-emitting diodes, or LEDs, that are used in everything from stadium replay boards to auto-dashboard illuminating systems.
A Family Affair
The forming of C3 (named after the brothers’ father, Charles Cree Hunter, and their mother’s maiden name, Colvard) in 1995 to produce the gem gave Jeff Hunter, then a controller at North Carolina State University, a chance to run a company. Eric Hunter, 38, remains a large shareholder. C3 began studies of the moissanite, including a 1996 survey of 30 Midwestern jewelry stores, 28 of which mistakenly identified a C3 pendant as a diamond.
Buoyed by that kind of response and needing money for research and development, C3 went public in November, selling three million shares at $15 each. The company said in December securities filings that while it believed its lab-created moissanite could make it a “superior substitute” for diamonds, the company didn’t expect to produce revenue until the first half of 1998.
Under a recent five-year, $12 million agreement between the two companies, Cree supplies the raw material in the form of three-inch crystals, which C3 slices into smaller bits. The material then is sent to Southeast Asia for fastening and returned to C3, where the moissanite is graded for quality.
To examine the new diamond substitute and alert jewelers that it was headed to market, James Shigley, a gem expert at the Gemological Institute of America, the Carlsbad, Calif., industry trade group, requested samples of synthetic moissanite from C3 last summer. The institute this week will release a report based on Dr. Shigley’s study.
“People experienced at looking at diamonds will say this doesn’t look like a diamond,” Dr. Shigley says. “When you compare moissanite against the diamond, it tends to have a grayish color. They don’t look sharp.” Still, his report projects synthetic moissanite could become widely available as a diamond imitation.
Told of the findings, C3 said that Dr. Shigley had seen early-stage gems, and that improvements had been made.
That may be so. C3 representatives last week accompanied a Wall Street Journal reporter to three Atlanta retail stores to have the company’s later-stage jewels examined. The first jeweler conducted a standard test that measures heat generated by carbon — present in both diamonds and moissanite — and concluded the .69-carat stone was a diamond. A second jeweler, certified by the Gemological Institute, studied the gem more closely, and appraised it at $2,700. A third jeweler conducted a less-scientific test, looking at the stone only under a small magnifying glass. He, too, said the fake stone was a diamond.
These jewelers’ responses may portend well for C3 once the gems are rolled out. But Cree has run into production problems. Ten researchers are behind schedule in coming up with material that would allow C3 to make higher-quality gems that are graded on the same color scales as diamonds. Currently, Cree is producing moissanite with a color grade that could be used in bracelets, which have smaller cuts of gems, but not in rings. C3 wants gems with a higher grade, says Jeff Hunter.
An Unmet Deadline
“C3 set up a pretty aggressive schedule,” Neal Hunter says. “We have not hit the schedule.”
Of course, the stakes are highest for C3. Lorraine Maxfield, an analyst at Paulson Investment in Portland, Ore., notes that C3’s stock has fallen 33% from its IPO price because some investors thought they were buying a stock that would quickly soar. When it didn’t, and the company didn’t release any news beyond the Cree contract in its first months, the sell-off began.
For Cree, analysts say a successful gem could be a big boost, but disappointing sales wouldn’t be a disaster. Neal Hunter estimates that 5% to 10% of Cree’s $43 million in projected revenue for the fiscal year ending June 30 will come from C3 orders.
Now, with C3 promising to have its product in stores this summer, a big question is whether there will be a strong demand for the fakes.
“That’s a big if,” says Ms. Maxfield of Paulson, the underwriter for C3’s initial public offering.
Jerry Ehrenwald, president of International Gemmological Institute, a New York-based trade group, says he thinks C3’s gems look like diamonds. But he adds he can’t imagine a husband saying, “Honey, instead of a diamond, I’m going to give you a moissanite.”