Liquidmetal Technologies Inc (LQMT)

[Eagle1947]

From "Seeking Alpha" today:

Liquidmetal Tech - Going Nowhere, Slowly
Feb. 17, 2022 10:11 AM ETLiquidmetal Technologies, Inc. (LQMT)11 Comments
Summary

I've known of Liquidmetal Technologies for a long time in a professional capacity.
Whatever promise there was seems not to have come to fruition.
My best evaluation is that it's going to continue to go nowhere slowly.
Liquid splash and droplets with reflections
dinn/E+ via Getty Images

A lot of promise, not much has happened

Liquidmetal Technologies, Inc. (OTCQB:LQMT) is one of those stock offerings that has long had the flavour of significant promise about it and yet little has ever seemed to come through. Well, this happens, even the finest of proposed technologies can not quite make it in the marketplace. The question then becomes, well, is it likely to? My conclusion is probably not. That leaves the stock at Liquidmetal as being of little to no interest to us as investors.

It's entirely possible that there will be little run-ups on this or that story. Possibly followed by fallbacks and so on. Knowing when they're about to happen would be nice so as to ride those waves. I'm also not entirely and wholly ruling out some drastic change in the company's prospects leading to a proper re-rating. But I regard that as most unlikely and this investing game is all about probabilities, not certainties, after all.

There is a bullish piece about Liquidmetal here on Seeking Alpha but then that's from 2014 and the promise doesn't seem to have arrived. There's a possibly more realistic piece from 2019 as well.

Really, it's all too old

The idea of a new technology that takes time to find users is fine, just fine. Folk need to know that it's there, think to work out how to use it and so on. We all know it's not invented on Friday and users are paying royalties on Monday. But Liquidmetal has been around since 2002 at least even as just a quoted company. Two decades is probably about enough time for people to do that working out over whether they want to use a new tech.

This also then flows into another problem which is that the patents are getting old. There's a - possibly not complete - listing of them here and at least one has already run out, several are about to do so. IP in the sense of legally exclusive knowledge is something they've not got a great deal left of that is.

We can even check this. I wrote about them for Forbes a decade back when they got that deal with Apple. Sure, they got a nice advance royalty payment but then the actual material doesn't seem to have ended up being used for all that much. I think, maybe, it has been used to make the SIM extractor tool for iPhones, that rings a bell. But that's a very slim supply to try to build a quoted company upon.

Do note my general attitude in that Forbes piece. There's nothing wrong with amorphous metals - that is, metal glasses - and a new method of making them cheaply, or cheaper, could well have some uses. The question is, well, are there those new uses?

A decade on perhaps there aren't. A decade does seem long enough to try that all out. Well, shrug, perhaps not then?

Golf clubs

Of course, hope can spring eternal and there's a new licensing agreement to make golf clubs out of these amorphous metals. But even that's not an entirely new idea as I also said at Forbes:

Just as an aside I was told a decade ago that a scandium/yttrium liquid metal would be the perfect (as in, not possible to be better) material to make golf club driver heads from.

Note that's told a decade ago, in a piece published a decade ago. So the idea is 20 years old at least, making golf club heads from these metal glasses. I even remember the outline of that 20-year-old conversation, those glass clubs were being talked about and our particular discussion was about which would be the best alloys.

It just doesn't seem very new, this announcement, that's all.

There's IP and IP of course

That patents are gradually - serially perhaps - running out isn't quite the whole point. For it's entirely possible to own IP in the sense of actually knowing how to do something, rather than the piece of paper that is the patent. So, perhaps Liquidmetal has those years of experience of making in volume - except they've not been making in volume at all. Quite the opposite. And the current business model is to shift the manufacturing over to Dongguan Yihao Metal Technology with Liquidmetal left as the R&D and royalty collection arm.

Which doesn't look all that massive an opportunity given that there's little IP to be selling as those patents expire.

One conclusion

One possible conclusion, one I tend to, is therefore that while Liquidmetal could have been wondrous it isn't going to be. The tech has been out there long enough for a use to be found for it if a use was going to be found for it. The patents are old, running out. There might well still be fringe uses but having had a good go at commercializing this tech it doesn't in fact have some wide commercial usage.

On the base technical grounds, that's about where I am.

And now to get conspiratorial

But something's still got to explain why the company's still going, why it's sitting on, from the last balance sheet, $5 million in cash, $11 million in short term debt securities, another $10 million in long term debt securities. Some $7 million of those bonds seem to be US Govt, which are secure enough. The rest are corporate but judging by their pricing valuation (as Level 2 certainty on prices) they may not be all that liquid. For a business that turns over $500k a quarter, maybe, that's a huge number.

So, what is it that's going on here? Well, the shareholder of 40% and change of Liquidmetal is an investor significantly involved with Mainland work. No, this isn't a spy story. Rather, it's very difficult to get capital out of China. About the only - legal - way of doing so is to buy a business asset, one that has to be authorised. Gaining access to the IP at Liquidmetal could well be something that was authorised. Keeping that $40 million in near-cash then becomes the placing of some portion of capital outside China.

I do not, at all, insist that this is true nor even claim it is. It is instead just a musing on what might be going on here. An active - if not exciting - business outside China is a way of curtaining off some portion of Mainland assets from the CCP.

If that is the explanation I find nothing wrong with it at all. It just doesn't make an interesting investment for the rest of us.

My view

If Liquidmetal was ever going to be able to make their alloys and their manufacturing methods a mainstream commercial opportunity then I think they would have done so by now. It is, after all, a decade since I first wrote about it, it's two decades since their first patents were granted. If it hasn't happened yet then my bet is that it isn't going to.

The investor view

I don't see any grand collapse in the price here. There is that near $30 million in near cash. The corporate valuation is around $120 million at present. There's still some hope value in the tech. They do still continue to work. I don't think that's worth $90 million (market cap minus cash) but it's probably worth something.

I also don't think there's going to be any grand boom in this stock price. We've all just been waiting too long to my mind. It's unlikely to happen now.


My net at the end of all of this is simply that there are better places to be than here, either bull or bear.

This article was written by

Tim Worstall profile picture
Tim Worstall

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Tim Worstall is a wholesaler of rare earth metals and one of the global experts in the metal scandium. He is also a Fellow at the Adam Smith Inst in London and an writer for a number of media outlets, including The Times (London), Telegraph, The Register and even, very occasionally indeed, for the WSJ. This account is linked with that of Mohamad Machine-Chian: https://seekingalpha.com/user/52914142/comments
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within 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.