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Liquidmetal / Apple - unjustified hype over a near death experience

|Includes: AAPL, Liquidmetal Technologies, Inc. (LQMT)
If you're following Apple and the tech space you've probably heard about Liquidmetal. On 8/9/10 Liquidmetal disclosed that Apple had licensed its intellectual property.
This story captured the imagination of technologists and investors like few before. More conservative predictions were that the next generation iPhone antenna or MacBook body would be based on the material. But old memories of T-1000 in Terminator 2 also resurfaced and the blogosphere is buzzing with speculation in all shape and form. 
Predictably investors rushed to buy Liquidmetal's shares. The stock which had traded between 10-30c spiked to a peak of $1.76, came down to 65c and closed last night at 85c. All this activity was accompanied by lots of noise from stock promoters issuing recommendations to gain subscribers. Speculation was rampant since the company didn't disclose the terms of the deal.
Fortunately past sec filings by the company do provide enough information to understand the situation of the company, the deal and an upper bound for the intrinsic value of the company. There's currently a drastic gap between market price and intrinsic value.
The Company
Liquidmetal develops, manufactures and sells products made from amorphous alloys. Amorphous alloys ("Liquidmetal") combine properties of metal, glass and plastic. The company has been around since 1987 and ran up an accumulated deficit of $160M in the process.
Times got especially tough in 2009, which caused the company to raise $23M at horrific terms: $7.5M in 12% notes, convertible to common at 60c. $2.5M in preferred A-1 shares, convertible at 10c, $13.1M in preferred A-2 shares, convertible at 22c. Thrown in for free were 3.1M 60c warrants with the notes and 42.3M 50c warrants with the preferreds. On a fully converted basis the company which had 46.7M outstanding shares at the time raised $46M for 187M new shares. 
In 6/2009 the Company received notice of default on an outstanding loan. On 11/23/2009 they filed their last 10-q. Since then it's been struggle for bare survival with increasingly outlandish refinancing attempts. Their investors finally took control (the preferred vote as fully converted) and were able to get Apple which has been using Liquidmetal's materials for years in limited scale to buy out their intellectual property.
The Deal
Apple clearly wasn't interested in inheriting this mess so Liquidmetal's IP was transferred to a wholly owned subsidiary which then licensed it to Apple for use in consumer electronics and to Liquidmetal for use in all other fields. The intent was likely to hold the IP bankruptcy remote from the declining company to protect Apple's license in the worst case.
The license is "perpetual, worldwide, fully-paid, exclusive" "in the field of consumer electronic products". So they got a one-time payment without royalties for these privileges. But they didn't announce how much they received.
So how much did they get? First keep in mind this was a very distressed sale. Then remember that Apple isn't really known as generous or as weak negotiator. 
Liquidmetal announced a day after the deal that they paid off the $7.5M 12% convertible notes with interest and $2.4M in other debt. But they also made an exchange offer to the A-1/A-2 preferred shareholders to convert principal and accrued interest plus interest until 6/11 at their 10c/22c conversion prices. The offer was conditional on agreeing to a 6 month lockup for the shares and forgoing anti-dilution provisions of the 46.7M 50c warrants that came with the preferred. In return the warrant would be extended by several years until 9/2015.
Given that the company is willing to convert the A-1 preferred at 10c instead of redeeming them it is very clear it has no financial flexibility. Given additionally that they're making significant concessions to encourage preferred holders to convert now with lock-up and to give up the anti-dilution provisions, it seems likely that the company will soon attempt to raise significant capital at <50c.
So Apple's payment can't be much more than the $10.9M they repaid in debt. The company continues to be in dire shape and isn't currently (before preferred conversion) able to raise any capital, even at 10c per share. If the preferred conversion is accepted there will be about 140M shares outstanding. 
So what's the verdict? What's the value of holding the IP for the non consumer device space given all the liabilities of the company? Maybe optimistically three times what Apple paid? So about $30M or 21c per share after conversion of the preferred.
Given yesterdays closing price of 85c there's a significant opportunity to short the shares - particularly if they continue to climb.

Disclosure: Long AAPL, short LQMT