Liquidmetal Technologies Inc (OTCMKTS:LQMT) Making Big Moves

Source: Liquidmetal Technologies Inc

Shares of Liquidmetal Technologies Inc (OTCMKTS:LQMT) heated up real fast after the company announced a $63 million deal with Chinese firm EONTEC. The deal calls for LQMT receiving up to $63 million in financing with $8.4 million already received through the sale of equity. The deal calls for DongGuan EONTEC, a publicly traded company on the Shenzhen Stock Exchange (300328.sz), to receive a cross-licensing agreement. Rather interesting is that the investment is not being made by EONTEC, but instead the money is being made personally by Professor Lugee Li, the Chairman and majority stockholder of EONTEC.

Under the terms of the transaction, Professor Li purchased 105,000,000 shares at an aggregate purchase price of $8.4 million (or $0.08 per share) at the initial closing on March 10, 2016. The Purchase Agreement provides that Professor Li will purchase the remaining 200,000,000 shares at $0.15 per share and 100,000,000 shares at $0.25 per share for an aggregate purchase price of $55.0 million no later than ninety days after the satisfaction of certain conditions. In addition, the company also issued a warrant to acquire 10,066,809 shares of common stock of the company at an exercise price of $0.07 per share.

We really like this deal because it's not a toxic deal. Matter of fact, subsequent purchases are all at higher prices. The highest of which at $.25 per share is more than double LQMT's current share price. This is a win-win in our opinion for shareholders. For short term traders, there's an added kicker. The deal says that the purchases must be completed no later than ninety days after the satisfaction of certain conditions, including company stockholder approval of an amendment to the Company's Amended and Restated Certificate of Incorporation increasing the Company's authorized number of shares of common stock from 700,000,000 to 1,100,000,000. So if all goes according to plan, we should be trading at or above $.25 within the next several months.

We believe that this deal was structured as a personal investment for Professor Li and not for EONTEC because of the sensitivity of a Chinese corp investing in LQMT. If EONTEC had made the investment, the transaction could be construed as a takeover by a Chinese firm. Instead, Professor Li can say that this is a personal investment for him.

Professor Li founded EONTEC in 1993. The company specializes in magnesium alloy, aluminum and other light alloy precision die casting research and development, design, production and sales, mainly for consumer electronics, LED, medical equipment, auto parts, power tools, industrial parts and other fields. Professor Li said of the deal:

“EONTEC’s capabilities complement LQMT’s focus on production of high-performance parts, allowing LQMT to address a broad range of market opportunities from automotive, medical, and industrial customers. This partnership positions LQMT well to support design and production globally at a vastly increased pace."

Obviously what Professor Li is seeing in LQMT is the same as Apple. Last June, Apple renewed its exclusive rights to use Liquidmetal Technologies' unique metal alloys in its line of products. Liquidmetal's alloys are of interest to Apple due to their unique properties including high strength, corrosion resistance, light weight, and malleability. Apple has used Liquidmetal's technology to develop the SIM removal tool for the iPhone 3G nd the company has been rumored to be considering Liquidmetal for iOS device home buttons, touch sensors, and tamper-resistant screws.

The question that many are asking is how will Apple react to the investment by Professor Li. We feel it's too early to tell, but we know for sure that the folks at Apple are having meetings over LQMT. We also think the investment by Professor Li is part of an overall bigger plan that he has. We don't think shareholders should take this as a negative because with his board seat, there is finally someone on the board with skin in the game. He has the most to win or lose with LQMT now. We will be updating Insider Financial as soon as we know more. For continuing coverage on LQMT and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

Disclosure: We have no position in LQMT and have not been compensated for this article.