Liquidmetal: LM 105 Breakthrough Bigger Than We May Now Think

This article is now exclusive for PRO subscribers.

(Editor’s Note: This article covers a stock trading at less than $1 per share. Please be aware of the risks associated with these stocks.)

Shares of Liquidmetal Technologies (OTCQB:LQMT) soared to 28.7 cents Friday, up 7.2 cents, or 33.4%, on more than five-times average (3m) volume of 27.6 million shares.

After reading the new release which catalyzed this stock to Friday's fame, it occurred to me that previous articles written about the company come nowhere near the point of this remarkable maker of 21st century alloys, but more specifically, the company's new Liquidmetal (LM 105).

"Manufacturing Liquidmetal components utilizing a commercially available amorphous alloy which is non-beryllium-containing has been a goal for a long period of time," Tom Steipp, President and CEO of Liquidmetal Technologies, stated in the Valentine's Day release to investors. "Now realized, LM 105 enables Liquidmetal Technologies to engage with customers on projects that had previously required alternative materials." [emphasis added]

The news release added another critical point - a point which firmly closes the deal for me to conclude that this company may be grossly undervalued, primarily due to the lack of coverage by Wall Street's and Seeking Alpha's most inquiring writers.

Follow me with my thinking regarding LM 105.

My Call to Liquidmetals

After I read the news release, I called the company to speak with the Marketing department and Investors Relations head, Otis Buchanan. After approximately 10 minutes of playing Cat and Mouse, I hung up the phone.

Initially, I came away with the feeling that I had wasted my time. Buchanan was not about to disclose to me more than the company is allowed under SEC regulations. But I had hoped to glean something - anything - out of a discussion with the company.

And I did, I believe.

Talk of a potential second Apple (NASDAQ:AAPL) deal (original 2010 agreement expires this month), a takeover, new CNC and MIM applications, or other deals outside of the consumer electronics space could turn out to be just a red herring to the big story behind LQMT, though any of those developments would add significantly to LQMT's unrealized value.

When I asked Buchanan about the market, or any particular company (or companies), which would be acutely interested in LQ 105 at this time, Buchanan said, I "should use my imagination" as to the "number of applications" as well as the countless number of companies who now may become interested in fabricating with the company's new non-beryllium-containing LM 105.

No entity was given a heads-up prior to the announcement, according to Buchanan, including Apple.

But, it was the second paragraph of the news release that sparked my "imagination" in, what I believe is, the appropriate direction to solving the mystery surrounding LM 105's real potential:

"Liquidmetal amorphous alloys have gained widespread commercial interest due to their unparalleled precision, high strength, scratch resistance and elasticity. The availability of LM105 which provides identical performance advantages opens potential new markets where non-beryllium-containing components are preferred." [emphasis added]

Preferred? Buchanan did emphasize in our conversation that beryllium is a toxic substance, and many of the company's engagements with potential customers concluded with the need for LQMT to develop a non-beryllium compound (with identical performance advantages) before commitments can be made.

And those commitments may actually also include old products, as well, shelved due to the rising chores of watchdog organizations pointing out beryllium's potential as the next asbestos (or benzine) legal nightmare.

Sounds far-fetched?

Even after numerous articles hailing the element as a wonder to mankind? Wouldn't a metal, lighter than aluminum, yet much stronger than steel, rank as something special? Maybe. But, consider the following excerpt from a law firm specializing in toxic tort cases:

The battleground in most toxic tort cases is causation. There are several reasons for this. In many cases it is difficult to trace the source of the chemical or substance that caused the injury. Also, many illnesses caused by exposure to toxins don't manifest until years after the exposure. Plaintiffs must weed out intervening factors (such as exposure to other chemicals) in proving the key element of their case: that it was the specific chemical manufactured or distributed by the defendant that caused the plaintiff's illness.

Toxic tort lawsuits are hugely dependent on science. Studies linking substances to certain diseases or health conditions can make or break a case. Changing scientific developments can instantly change the legal landscape. For example, lawsuits alleging that a certain workplace chemical caused cancer could fail for years, but if a single study linking the chemical to cancer emerges, plaintiffs in the same type of lawsuit may begin winning large damage awards. [emphasis added]

After years of research studies, meetings and debates about the data contributed from a multitude of sources, in Dec. 2002, the National Institutes of Health raised beryllium to a "known" cause of cancer, from a "reasonably anticipated" cause of cancer.

But, that, of course, is not new.

What may become new, is the science of pinpointing direct causation of cancer or Chronic beryllium disease (CBD) from a single source of the toxic substance.

The Centers for Disease Control and Prevention lists a slew of ongoing studies on the matter of beryllium and cancer, with the latest two studies mentioned on its website conducted in 2011, only less than three years ago.

From the standpoint of tort lawyers, the big class action suit of the size waged against the famous defendant in the asbestos case, Johns-Manville, has not yet come to the beryllium industry.

Corporate legal counsels across the globe must know one will be coming at some point, as the science of genetics and molecular biology (a technique to isolate another toxic substance, cadmium) will definitively catch up with and overtake the various exculpatory theories paid for by the beryllium industry in a manner akin to the obfuscation perpetrated for decades by the tobacco industry.

A Johns-Manville-size class action lawsuit against the beryllium industry is inevitable, in my opinion.

What seest thou else in the dark backward and abysm of time?

Shakespeare, The Tempest


So, digesting the potential mess of an unimaginable-size liability potential of 800,000 of the industry's workers who have been exposed to beryllium, why would any company resist LQMT's non-beryllium compound, especially if the new product is truly identical in characteristics to beryllium, itself?

Would a company manufacturing with beryllium compounds, knowing another non-toxic equivalent compound is available, be especially liable in the eyes of the public?

And for those thinking that the company would come right out and tout this point may want to consider that the issue should come from journalists, legal counsel, or liability insurance carriers, instead. Why would a supplier backhand its customers in such a way?

Liquidmetal Technology is scheduled to report Q4 earnings and host a conference call on Feb. 25 to provide guidance on developments since last quarter's conference call.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LQMT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.