What I am attempting to explain is that your simple statement that "The 405 million LQMT shares are held indirectly by Li on behalf of Eontec" does not provide enough information to inform me on what that means. Are the LQMT shares held in a trust? Is the trust, if any exists, revokable or irrevokable? I could say that my assets are being "held indirectly by [me] on behalf of my [heirs]," but then again, I could change my will or spend all of my assets, etc., and my heirs may get nothing.
Even so, assume just for the sake of argument that Li transferred all of his share to Eontec yesterday, that doesn't alter my underlying thesis that Li will still need to walk a narrow tightrope in negotiating royalty fees.
As previously stated:
Consider the following (extreme, but useful for illustration purposes) scenarios. Assume there is $100 profit to be made from the manufacture of a unit and the royalty rate are as follows:
(a) LQMT receives a royalty of $99.99, which leaves Eontec with $0.01 profit per unit. Under your theory, Eontec shareholders should be happy because they "indirectly" have about 45% of LQMT.
Also, consider what would happen LQMT decided to pay a dividend, because the royalty one is just rolling in. Even if Li decided to pay out 100% of the royalty payment of $99.99 to LQMT shareholders, Li (or "indirectly" the Eontec shareholders) would get only .45*$99.99 = $45.15.
(b) LQMT receives a royalty of $0.01, which leaves Eontec with a $99.99 profit per unit. Clearly, Eontec's share price will go up much greater under scenario "b" rather than "a."
The above scenarios were not intended to be realistic. They were merely provided to illustrate that Li's problems with satisfying Eontec and LQMT shareholders won't be whitewashed away by "The 405 million LQMT shares are held indirectly by Li on behalf of Eontec."
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