Tales From The ...'s  Instablog

Tales From The Future
Send Message
Tales From The Future (tftf). I picked my nickname because many advisors and investors claim they can predict the future of the (stock) markets and somehow pick the winners. I don't. I usually do not engage in short-term trading and myopic analysis (quarter by quarter, without looking at the big... More
My blog:
Tales From The Future (Raw Feed)
  • Liquidmetal - A Pink Sheet Riding On The Coat Tails Of Two Giant Consumer Companies 11 comments
    Jul 18, 2013 4:46 AM | about stocks: LQMT

    Foreword/Caveat: Note that I shy away from penny/pink sheet stocks 99% of the time, so this article is an exception for me. I advise all less experienced/novice investors to stop reading and do the same - stay away from buying OTCBB stocks unless you are an experienced trader. Update: Also take into account the number shares outstanding and shares approved of such companies.

    That being said, here's the company in question: Liquidmetal.

    Liquidmetal has been the subject of a good article (although too optimistic view in my opinion, especially concerning the timeframe to market...) on SA back in 2012.

    I will quote from that article rather than rehash the facts:

    Liquidmetal Technologies (OTCPK:LQMT) is a $46 million market cap materials company that has one of the most intriguing disruptive technology stories to come out in many years. It has been an extremely volatile stock lately, as the rumors of inclusion in the iPhone 5 come and go, and as always with an OTC penny stock, it requires a high level of risk tolerance. And therein lies a potentially enormous opportunity.

    Liquidmetal was started as a Caltech research project in 1993 and eventually IPO'd on the Nasdaq in 2002 with a $1 billion market cap and $20+ share price. They eventually got delisted to the OTC after the 1-2 punch of poor management decisions and a product that was still in research mode, and therefore not yet ready for prime time production. However, in August 2010, Liquidmetal was able to replace its management with experienced talent and pay off all its outstanding debt, when Apple (NASDAQ:AAPL) paid roughly $20 million to license their technology to be used for personal electronics.

    To learn why the world's premiere technology company would take interest in a nearly bankrupt company in the first place, it helps to take a step back in time to Chem 101. Liquidmetal's patented amorphous materials are able to take the best qualities of both traditional metals and plastics. Due to its amorphous atomic structure, liquidmetal does not take on the crystalline shape of other metals, but rather arranges its atoms in completely random formations, like a liquid or plastic. This allows it to be injection-molded into extraordinary precise shapes similar to a plastic, while overcoming the crystalline weakness and necessary machining inherent in other metals.

    (Source: seekingalpha.com/article/578641-the-liqu... )

    Note again that this article was very positive on LQMT.OB. As we know in the meantime, the iPhone5 was announced later in 2012 without the LQMT.OB technology being used and the stock faded back to single digits - the recent 52 week low was 0.05 USD with a market cap below 20M USD.

    So why discuss this company at all?

    Yesterday, the company was back in the news with Apple being awarded a patent based on the LQMT.OB technology:

    A new patent awarded to Apple could pave the way for a whole host of devices -- iPhones, iPads, iPods, iWatches -- made from the high-tech, super-touch amorphous metal alloy.

    http://zd.net/1bKF1Hl

    Hence the stock's 220%+ uptick spike yesterday on heavy volume (92M shares traded versus an average of under 2M shares !).

    Liquidmetal also counts Swiss watch giant Swatch (Omega...) as its customer since March 2011:

    Swatch Group signs Exclusive License Agreement with Liquidmetal Technologies

    http://bit.ly/13zfzg9

    Summary: Is this company a buy? Probably not for now, the stock price faded in the past - after huge spikes based on news linking the company to Apple and other large companies interested in the technology.

    As with virtually all pink sheet stocks, many open questions remain on the financial side. The company (still) had no new revenue streams in 2011 and 2012 - revenue was below 1M USD in both years. You can compare it to a biotech with only limited upfront payments from licensing and achieved milestones from time to time (see 2008-2010 revenue).

    The current contract with AAPL is a good example:

    Unfortunately for the company and shareholders, the deal with Apple was for a one time license fee and grants Apple exclusive rights for the terms of the deal (originally February 2012, which was subsequently amended to extend through February 2014) to use in "consumer electronic products" (which is very broad-based).

    (Source: www.streetinsider.com/Insiders+Blog/Liqu... )

    I still haven't seen projections how much money LQMT.OB gets in case of future mass production beyond the publicly announced upfront payments. The contracts with Apple and Swatch appear to have only netted Liquidmetal one-time fees (to get a foot in the door?).

    LQMT.OB was in a weak position when the contracts were signed with these two giant consumer companies and LQMT.OB probably was desperate to get prominent customers - to build up reputation and market acceptance for its technology.

    The open high risk of (future) technology uptake in the mass market can also be compared to a young biotech company.

    For now, I would just put LQMT.OB on your stock watchlist in case it can sign more customers - and/or in case Apple starts mass-producing iDevices of any kind using the technology in the next 2-3 years.

    As we have seen on July 18, 2013 any mention of the technology can create huge spikes for short-term traders - and in contrast to many other (shady) penny stocks both the underlying technology and the prominent customer list is real - but so are the risks (share count, pilot projects' outcome, recurring revenue agreements in the future...)

    20 years after the R&D project was started we may finally see the technology trickling into the market over the coming years - keep an eye on LQMT.OB.

    Stocks: LQMT
Back To Tales From The Future's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (11)
Track new comments
  • Tales From The Future
    , contributor
    Comments (7575) | Send Message
     
    Author’s reply » Addendum: If you are interested in the LQMT.OB technology and implementation difficulties, also read this interview from 2012:

     

    Liquidmetal Inventor: Apple Will Use It In A 'Breakthrough Product'

     

    http://read.bi/12JXSz2

     

    It looks like AAPl will use the technology in smaller items first (such as the 3G iPhone SIM tray, that was a test run). Larger items such as laptops are still difficult to produce, that's where the new patent (new in terms of public discovery in summer of 2013) mentioned in my Instablog comes handy.

     

    In the meantime, a rumored iWatch or parts of future iPads and iPhones may be ideal products for the technology.

     

    AAPL has extended the deal to use the technology until early 2014:

     

    "As noted by MacRumors, a U.S. Securities and Exchange Commission filing revealed today that Liquidmetal Technologies will continue to license its technology to Apple through Feb. 5, 2014. The previous deal from 2010 gave Apple rights to the patented amorphous metal alloys through Feb. 5 2012. As of yet, we only know Apple has tested Liquidmetal in its iPhone SIM card ejector tools, but we recently heard CEO Thomas Steipp (above) hinting that Apple plans to commercialize the technology. Rumors in April indicated it could be used in products on a larger scale within a few years."

     

    http://bit.ly/1dGNqd6

     

    It will be important to see if this deal will be extended again next year...
    18 Jul 2013, 07:48 AM Reply Like
  • bd4uandu
    , contributor
    Comments (2074) | Send Message
     
    But what about the dilution?

     

    "It is apparent that the company is still suffering great losses. They will need to increase the funds from sales and cut their expenses. Some problems also arise from the issuance of common stock which is currently 320 million outstanding shares with another 18 million issued last week. The maximum authorized amount was also increased with 100 million and now is 500 million shares."

     

    http://bit.ly/15kgtBB
    26 Jul 2013, 07:48 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (7575) | Send Message
     
    Author’s reply » True with almost any penny stock. They have huge amounts of outstanding and authorized shares to flood the market...that's why I usually don't dabble in pink sheet stocks.

     

    But thanks for pointing it out again.

     

    Things were moving slowly at LQMT. They have many pilots and prototype development with customers, but not mass production.

     

    (That's where the new patent with AAPL comes in, this could change in the next 2-3 years)...
    26 Jul 2013, 09:44 AM Reply Like
  • bd4uandu
    , contributor
    Comments (2074) | Send Message
     
    I have played LQMT a couple times with good results. I don't think it is for the long term just yet. Maybe if it gets into the single digits again I will bite. The only thing driving the stock is the Apple rumor. It seems it would made a decent case for an iWatch but maybe more a coating for the iPhone. It's worth watching. The heavy volume on the last pop is encouraging.
    26 Jul 2013, 11:19 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (7575) | Send Message
     
    Author’s reply » More on LQMT's troubled background here:

     

    http://bit.ly/1c71G2f

     

    I didn't want to go into details since most of the execs have been replaced in the meantime.

     

    The last parapgraph from 2010 is worth reading regarding share count...:

     

    "Without an accurate share count, LQMT investors cannot estimate the current market value of their company or determine if that valuation looks fair.

     

    If the share count remains at 63.8 million, LQMT sports a market capitalization of roughly $48.5 million. If the share count has climbed to between 100 million and 300 million, however, then the current stock price suggests a market value of $76 million to $228 million – potentially exceeding that featured by the Nasdaq-traded company Steipp previously oversaw – instead. "
    29 Jul 2013, 01:36 PM Reply Like
  • bd4uandu
    , contributor
    Comments (2074) | Send Message
     
    "Some problems also arise from the issuance of common stock which is currently 320 million outstanding shares with another 18 million issued last week."
    http://bit.ly/12YbiEc

     

    I am sure they got a lot better price last week then the week before. Does the analyst own shares also?
    29 Jul 2013, 02:00 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (7575) | Send Message
     
    Author’s reply » News:

     

    Apple Continues Work on Liquidmetal Alloys for Use in Future Products:

     

    http://bit.ly/1az7IqT

     

    http://bit.ly/1az7IH9
    21 Nov 2013, 04:51 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (7575) | Send Message
     
    Author’s reply » News about Liquidmetal and AAPL:

     

    Apple Interested in Liquidmetal Alloys for Home Buttons, Touch Sensors, and Tamper-Resistant Screws

     

    http://bit.ly/1dLFJlm
    13 Jan 2014, 11:21 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (7575) | Send Message
     
    Author’s reply » The never-ending story continues...

     

    "Apple exploring new ways of melting and feeding Liquidmetal for manufacturing"

     

    http://bit.ly/1lYq8d1

     

    Since Swatch (Omega, also a licensee) and AAPL are now direct competitors it will be interesting to see when AAPL will do more parts using the technology.
    11 Sep 2014, 02:45 PM Reply Like
  • bd4uandu
    , contributor
    Comments (2074) | Send Message
     
    I am out of LQMT right now sold before the iPhone release. Probably keep an eye on it and ride the next rumor. GL
    11 Sep 2014, 06:58 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (7575) | Send Message
     
    Author’s reply » Another license update:

     

    "Apple Renews Exclusive Rights to Liquidmetal Technologies' Alloys"

     

    http://bit.ly/1LnpHTp

     

    But there's still no substantial update in terms of revenue for LQMT (I have no position, too risky for me). LQMT basically has no meaningful revenue at the moment.
    24 Jun 2015, 11:09 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.