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23 Apr

Liquid Metal Stocks (LQMT) – How Trump’s Trade War Opened the “Door”

by

Tesla Win in China:  How Liquidmetal’s ‘BMG’ Strategy Cooking At “Secret” Manufacturing Facility Catalyzes Leap to a $1.00 LQMT Stock

And You’ll Now Know Why No News Is…Good News! 

After more than a decade of stifling foreign-owned manufacturers to no more than a 50%/50% ownership arrangement with a local Chinese partner, Beijing announced April 17 a phase-out plan of this restriction and allow foreign makers of gas-powered and commercial vehicles 100% ownership of their production by 2022.  In addition to dismantling ownership restrictions, the 25% import tariff levied upon all foreign gas-powered and commercial vehicles will be fully lifted by 2022, as well.

Because new ownership rules and tariff-free imports won’t be in effect for another four years, the impact of the change won’t be felt immediately within the gas-powered and commercial vehicle markets.  But the sole exception to Beijing’s restrictive trade laws regarding the production and sale of foreign vehicles in China is the electric-powered vehicles (“EV”) market, the restrictions of which have been lifted for production and sale of EVs —this year!

Read: China just rolled out the welcome mat for Tesla and

Tesla Gets Edge Under China’s Relaxed Rules for Foreign Automakers

Media have since published articles about how President Trump has been responsible for Beijing’s “concession” to a key industry of his base of support in America’s industrial belt of Pennsylvania, Ohio, Michigan, Illinois and Indiana.  Other articles spotlights the big win for Elon Musk and his iconic car company, Tesla. In all, this news is big out of Beijing for Tesla and its suppliers, including Liquidmetal Technologies (ticker: LQMT), a stock with the most potential of soaring with capital gains I can find.

For my special subscribers, I issue this special report due to the enormous impact these law changes in China have on my holdings of Liquidmetal Technologies (ticker: LQMT), the leader of innovator of amorphous metals (liquid metals) and manufacturing processes to the world.  But, before I get back to my analysis and commentary about the shell-shocking news out of China and its potential impact upon Tesla and Liquidmetal Technologies, newcomers to my newsletters should be introduced to the Liquidmetal Technologies (“Liquidmetal”).   

According to its latest 10-K filing with the Securities and Exchange Commission (“SEC”), the description of Liquidmetal Technologies is as follows:

We are a materials technology company that develops and commercializes products made from amorphous alloys. Our Liquidmetal family of alloys consists of a variety of proprietary bulk alloys and composites that utilize the advantages offered by amorphous alloy technology. We design, develop and sell custom products and parts from bulk amorphous alloys to customers in various industries. We also partner with third-party manufacturers and licensees to develop and commercialize Liquidmetal alloy products.

Now that the coast is clear in China for EV makers, this report links together two companies related to Liquidmetal.  One, Tesla and, the second, Dongguan Eontec (ticker: 300328.SZ) of Dongguan, China, a little-known company to those new to the LQMT trade.  Both companies will be joined in the Chinese market through a marriage of dependency via one overarching and critical material (amorphous alloys).  One produces amorphous alloys parts (Eontec), and the other needs it, badly, for the competitive edge needed to thrive in the Chinese market (Tesla).  

And to feel the full impact of the implications of this game-changing news and the potential amorphous alloys will have on the largest EV market of the world (China), watch this these video, linked below, and they will explain how 21st-century amorphous alloy technologies have entered the beginning years of transforming the production and products we work with, depend upon and play with in a modern world.  Folks, these amorphous metals are Star-Trek stuff to go along with the coming Internet of Things, EV cars, hypersonic travel, virtual reality, miraculous medicines, robotics and lots of things and capabilities you would see in futuristic serials, such as Star Trek.  

Impact of Materials on Society (IMOS) – Amorphous Metals

Introduction to Amorphous Metal

And a brief introduction to the ENGEL Liquidmetal machine:

ENGEL e-motion 110 T Liquidmetal edition (video)

ENGEL e-motion 110 T Liquidmetal edition (brochure)

The machine demonstration in the video link, above, is the actual machine that will be sold in 200-lot sizes (so, I hear) to partners of Liquidmetal Technologies.

Okay, back to Eontec.  Who are they?

Eontec is the very-first-to-market supplier of amorphous alloys technologies and applications to the EV industry.  In the case of Tesla, Eontec supplies “door-lock cases” made from amorphous alloys to Tesla for the EV maker’s fleet.  That’s the relationship.

Supplying Tesla with 21st-century door-lock cases is Eontec’s seminal and critical step toward integrating more amorphous alloys parts into America’s iconic maker of EVs.

Now, bear with me, as I’ll get to the punchline of why the success of Eontec is of importance to the Liquidmetal trade.  How the LQMT trade will ultimately work is very ‘slippery’ to the casual observer of the stock; so, there’s a lot of information to cover before you know everything about why LQMT may become the trade of my lifetime.  No, this is no hype, as you will come to know. Read on.

Tesla’s decision to tip-toe into incorporating Eontec’s amorphous alloys into the car-maker’s EVs wasn’t an idea to introduce a novelty to the Tesla brand.  Absolutely not! Instead, it’s a tell-tale sign of management’s decision to deploy this game-changing material throughout the company’s product line and manufacturing process—first, before its competition.  

And how do I know this?  Read on, because how I know will become abundantly clear, as those in the business of EV manufacturing have already demonstrated to me the utmost importance of amorphous alloys as the new material entering rapidly into the automotive industry, and most especially in the EV industry.

And those who don’t read endless industry reports for a living, as I do, ‘the cat leaped out of the bag’, in full view of the general public in April 2017, when the most-read English edition of news out of China spotlighted Eontec as the most intriguing, hi-tech company to lead the charge of change of the consumer’s experience of the 21st century.

It took two years for editors of mainstream news outlets to catch on, but

in April 2017, China Daily, reported the emergence of Eontec as the global leader in amorphous alloys, and included ‘a mention’ of the supply contract the company had signed with Tesla Motors in 2015 to fulfill orders for amorphous alloy parts it will need in present and future Tesla models.

Eontec is already eyeing potential opportunities in automotive, healthcare and aerospace. What’s more, since 2015, US automaker Tesla has been using Eontech’s amorphous metals in its car door-lock cases.

“Tesla’s door-lock cases have a strong impact resistance. This helps them withstand opening and closing of car doors tens of thousands of times,” said [chairman of Eontec, Li Yangde]. “Although this business is still small, we have confidence the future will be brighter.”

Take note of the name in this article clip: Li Yangde.

Okay.  From the standpoint of Tesla, door locks wear out faster than any other functional assembly a consumer touches on a vehicle.  And from the standpoint of Eontec, manufacturing door-lock cases for the most-famous EV maker on the planet is only the beginning of taking over all other parts that become trouble spots associated with wear and tear to automobiles.  

So, who are these clever folks at Eontec?  And who is Li Yangde? …the chairman of Eontec, who I quoted, above, from an excerpt from the article in China Daily.

In short, Eontec and Liquidmetal Technologies are the same company.  Ha?

Yes, that’s right.  Li Yangde is also known in Asia as Professor Yeung Tak Li Lugee Li, but known in the Western press as, professor Lugee Li.  And Lugee Li is also the chairman, CEO and dominant stockholder of Liquidmetal Technologies. The two companies are public companies, but because professor Li owns an overwhelming number of shares of both enterprise, he is de facto sole proprietor of both, who controls Eontec and Liquidmetal as one seamless unit.

Eontec was founded by Li in 1993.  Since then, he built the company to profitability and hundreds of million of dollars for himself.  In 2017, Li sold more than $64 million worth of Eontec stock to purchase a controlling stake of outstanding shares of LQMT, and assumed the position of chairman and CEO of Liquidmetal.  Therefore, anytime you read, see or hear about Eontec, Liquidmetal Technologies is the company referred to. You’ll get the full impact of why I assert this at the end of this report.

So, as far as I’m concerned with respect to Eontec and Liquidmetal is, that essentially, both are one in the same company, legally.  Eontech is a Hong Kong corporation (‘under the thumb’ of China, politically), and Liquidmetal is a U.S. corporation, with laws and customs which must surely be truly liberating in comparison.  I’ll tell why this is of utmost importance soon.

Read the verbiage in Liquidmetal’s 10-K report for fiscal 2017, wherein it reads:

Eontec License Agreement

On March 10, 2016, in connection with the 2016 Purchase Agreement, we entered into a Parallel License Agreement (the “License Agreement”) with DongGuan Eontec Co., Ltd., a Hong Kong corporation (“Eontec”) pursuant to which we each entered into a cross-license of our respective technologies.

The License Agreement provides for the cross-license of certain patents, technical information, and trademarks between us and Eontec. In particular, we granted to Eontec a paid-up, royalty-free, perpetual license to our patents and related technical information to make, have made, use, offer to sell, sell, export and import products in certain geographic areas outside of North America and Europe, and Eontec granted to us a paid-up, royalty-free, perpetual license to Eontec’s patents and related technical information to make, have made, use, offer to sell, sell, export and import products in certain geographic areas outside of specified countries in Asia. The license granted by us to Eontec is exclusive (including to the exclusion of us) in the countries of Brunei, Cambodia, China (P.R.C and R.O.C.), East Timor, Indonesia, Japan, Laos, Malaysia, Myanmar, Philippines, Singapore, South Korea, Thailand and Vietnam. The license granted by Eontec to us is exclusive (including to the exclusion of Eontec) in North America and Europe. The cross-licenses are non-exclusive in geographic areas outside of the foregoing exclusive territories.

Beyond the License Agreement, we collaborate with Eontec to accelerate the commercialization of amorphous alloy technology. This includes but is not limited to developing technologies to reduce the cost of amorphous alloys, working on die cast machine technology platforms to pursue broader markets, sharing knowledge to broaden our intellectual property portfolio, and utilizing Eontec’s volume production capabilities as a third party contract manufacturer.

If Eontec and Liquidmetal share patents, licenses, technical information and trademarks with each other; and if Eontec has an exclusive to sell in Asia, and Liquidmetal has an exclusive to sell in North America and Europe where is the dividing line between the two entities?  Aside from territories assigned to each entity (of which, can be changed by the de facto proprietor, professor Li), there is no dividing line.

So what?  

Li’s takeover of U.S.-based Liquidmetal is part of an integral and grand strategic move to align Eontec and Liquidmetal with the most iconic name of the world, Apple, and a budding iconic name, Tesla.  With management of both big consumer names incorporating amorphous alloys into their products, the overseas journey to operate and partner within close proximity of Apple and Tesla executives makes sense, of course.  

And if we take into account Apple’s announced plan to repatriate $250 billion of overseas capital back to the U.S. (for a large takeover?  Of Tesla, is the rumor.), Li’s idea makes sense. He’s following the money.

Was it a coincidence that Li made the plunge with $64 million to buy Liquidmetal in December 2016, mere weeks following the U.S. presidential election?  Maybe. But when I tell you about the other “coincidences,” all these coincidences add up to enough circumstantial evidence of strategic shift at Eontec to reduce its net financial exposure in China and dramatically increase its net financial exposure in the U.S., where investors of LQMT will thrive at the expense of Eontec investors.

I’ve already reported Apple’s continued exploration into amorphous alloys to incorporate them into future products by exposing where Apple’s mysterious and “secret manufacturing facility” is located, in my last report of March 28.  

Spoiler alert: as I explained in March 28 report, the secret manufacturing facility must be located at Liquidmetal labs, a few hundred mile south from Apple’s headquarters in California, the precise state of which was mentioned as the locale of this “secret” lab.  And I don’t want to get emails that suggest the location is Caltech. The money for research and development at Liquidmetal dwarfs funding available at Caltech.  Those Caltech engineers have desks at Liquidmetal.  What do you think 28 employees at Liquidmetal are doing a company that presently has limited production?  Ha?

And the reason for Apple, too, to take-up shop in the labs of Liquidmetal is a subject of another bombshell article I intend to report in the near future.  The reason might easily explain the dearth of news coming out of Liquidmetal. But for now, I want to suggest to you how Liquidmetal ties-in to Tesla, and the the news of China’s relaxation of its trade rules for the EV market only enhances Eontec/Liquidmetal’s supply relationship with Tesla further.

From an old Discover Magazine article of 2004, entitled, Glassy Metals May Be Materials of the Future—They’re harder, stronger, and basically just better, I found the most appropriate quotes…and from the most appropriate source to buttress my strong suspicion of where the Tesla and Liquidmetal partnership is going.  And it’s all fascinating, of course.

Discover Magazine writer Brad Lemley quotes William Johnson, a materials science professor at Caltech in Pasadena, and another science adviser to Liquidmetal at that time, in 2004, professor William Nix of Stanford University for the article.

Following a short introduction, Lemley pens:

“Everything from an Abrams tank to an F-16 jet to a bicycle can be made out of this [amorphous alloy], and because it is two to three times the strength of conventional alloys, you can halve the weight or more. That’s not evolutionary, it’s revolutionary,” says [William Johnson, materials science professor at Caltech in Pasadena]. “This is the structural material of the future.”

It’s fun to find old articles with precious quotes such as this one.  Of course, the “structural material of the future” that Lemley refers to in his article of 2004 is the structural material of… right now.  The future is now, and at the same company (under new management of professor Li’s) that foreshadowed today’s LQMT trade.

The article continues:

Strength is not its only virtue. It can also be formed like a plastic. So instead of laboriously making sheet metal and then cutting, machining, and drilling, say, a car fender, all of which weakens the part, a glassy metal fender could be injection-molded in one piece—a breakthrough. “The idea that you can cast something like a plastic part with very high strength is a completely new development,” says materials science professor William Nix of Stanford University, an adviser to Liquidmetal Technologies, which is trying to commercialize the metal.

Better yet, it can be readily made into a foam. “With most metals that’s difficult, because the bubbles want to rise to the surface of the molten metal,” says Johnson. The fact that amorphous metal is thick and like plastic when molten permits the formation of a foam panel that is 99 percent air but roughly 100 times stronger than polystyrene. A sandwich made of two thin sheets of amorphous metal flanking amorphous foam would be strong, light, insulating, fireproof, bug-proof, rustproof, sound dampening, and difficult to penetrate with bombs. Such panels could form buildings, ship hulls, airplanes, and car bodies.

Because the intense secrecy surrounding amorphous alloys technologies, and reinforced through contractual agreements between Liquidmetal and Apple, and Liquidmetal and Tesla, we can be nearly 100% sure that Liquidmetal holds the most important patents and manufacturing technologies surrounding bulk metal glass (“BMG”).  It’s the intricate technology of BMG that Tesla needs to make the big unwearable parts of its models. If you’ve done your homework by following the videos links, above, you see why BMG is the true Holy Grail of Tesla’s success, and, therefore, my future fortune in LQMT.

A metal with a specific gravity (weight) roughly equivalent to the specific gravity of plastic; and is as easy to form as plastic via injection molding (metal injecting molding (“MIM”)); and is strong enough to protect an “Abrams tank” against a direct hit, must have become an obsession of Elon Musk’s.  I can assure you of that.

With if the body frame, engine parts and…well everything that makes up a Tesla automobile… was constructed, using BMG, the limited power capacity of a battery could be dramatically stretched, which also could, therefore, allow a greater number of miles traveled before a battery recharge is required.  Oh, and the 1,000s of parts that make up a Tesla can be manufactured for much less money, too. Think of it! Greater mileage, less manufacturing costs, more reliable construction, and dramatically reduced owner maintenance. Tesla is going to destroy its global EV competition, just as Apple did with the global consumer electronics industry.

The article continues:

…But metallic glass has one huge problem—it’s expensive. The first commercialized injection-moldable form costs about $15 a pound to make versus roughly $1 a pound for aluminum and 25 cents a pound for steel. Johnson, Kang, and other researchers are working on variants with cheaper constituents. “I think we can make a viable amorphous steel product. I would call that a very likely development,” says Johnson. Eventually, he says, it could cost the same 25 cents a pound as ordinary steel. “That will change everything,” he says.

The comments I’d like to make regarding this final excerpt about costs is enough fodder for another report, but the bottom line about cost is: we’re there right now.  

If you read through Liquidmetal literature and read into professor Li’s constant reference to his call for collaboration with Liquidmetal, you should NOT read into his call for collaboration as a sign of desperation that many micro-cap biotechnology companies end up doing after the cash runs out.  In the case of Liquidmetal, the company is loaded with cash! And there’s more from where that cash came from, too. Li is not a billionaire, as far as I know, but he’s at least swimming with the 100s-of-millions fish.

Instead, his call is for a partnership with a ready-to-go behemoth maker of large vehicle parts, and who needs Liquidmetal as much as, or more than, Liquidmetal needs the behemoth parts maker.  And I know in my gut that Liquidmetal is only a contract away with Tesla for, at least, the design and patent rights to both of Liquidmetal’s BMG and BMG production technologies.

And with all the secrecy and skulduggery surrounding these technologies—that many patriotically-driven individuals and groups have insisted should be guarded for national security concerns— I wouldn’t be surprise at all if Musk has his own engineers at Liquidmetal, too, just as Apple must have its own engineers at Liquidmetal’s plant now.  Why? Come on.

Tesla has more to gain from Liquidmetal technologies than Apple has to gain by incorporating ‘cool’, lightweight scratch-resistant and durable iPhone casings to the company’s future iPhone models.  In contrast, Tesla’s entire business model is predicated upon producing the lightest vehicle possible without compromising strength…and at the cheapest cost. BMG solves all of Tesla’s existential challenges in one ‘fell swoop’.

With the opening of China to Tesla’s EVs, the ballgame just changed radically for Tesla, Eontec and, most importantly, for my LQMT holdings.  

Of all the articles I could find about China’s announced decision to lift all restrictions from foreign-owned EV makers, the best one comes from a good source of mine, Eletrek, whose editor Fred Lambert concludes his article, entitled, Tesla could now own 100% of an electric car factory in China, says government, with the comment that Tesla CEO Elon Musk made a shrewd move by holding out for a better deal with respect to his planned mega-plant in China.  The jackpot prize of building, operating and owning 100% of the revenue, earnings and profits from Tesla’s planned China-based auto plant now appears to be his.  And with that win, Musk will be finalizing agreements for amorphous alloys supplies for his future Chinese plant.  

Eletrek’s Lambert writes:

As we discussed on the podcast last week, it shows that Tesla was smart to hold off on pulling the trigger on a Chinese factory.

Virtually every other foreign automaker already made deals to create joint-ventures in China for electric vehicles over the last year in preparation for the country’s zero-emission vehicle mandate, which starts next year.

They had to do so in order to quickly increase EV production and not be penalized for the current gas-powered car business in China.

Tesla was the only automaker able to hold out since it doesn’t have a gas-powered car business to worry about. That allowed them to wait out the storm until reaching a deal for a wholly owned factory, which now seems possible.

Therefore, it wasn’t a big issue for China to lift the restriction, at least for electric vehicles, since most other automakers already complied to the ownership restriction due to the urgency that the ZEV mandate created.

It’s hard to believe that it is only a coincidence.

Ha!  Of course, it’s hard to believe “it is only a coincidence.”  Right?

And as far as professor Li, don’t tell me he didn’t know about the implications of a Trump presidential win.   I mean, plowing $64 million into Liquidmetal weeks after the election results is NO coincidence. Is professor Li’s timing of his big purchase a coincidence, too?  Of course, not.

And I’m going to end the article here with something to think about.  I foresee another coincidence in the future.

Actually, the news out of Beijing about lifting trade restrictions for EVs is a desperation move by the Mandarin-thinkers in China.  Contrary to the thinking of Eletrek’s Fred Lambert, China cannot afford a trade war with the U.S.  Money is already escaping China at a huge clip despite capital controls and strong-arming threats from the Mandarins in Beijing.  

Most Bitcoin transactions are made from China servers—as a way for mainland Chinese to get money out of China.  Reports of property prices, from Vancouver, Canada to Kuala Lumpur, Malaysia skyrocketing due to mainland China money fleeing China are everywhere.  Smuggling gold out of the country ( a popular method of avoiding capital controls) comes with the death penalty, in some cases. The situation is quite desperate for those on the Chinese mainland with wealth.  Professor Li, a wealthy man, himself, is not far enough from Beijing’s reach.

Read this very short article, entitled, Patriotism doesn’t pay for China Inc., as buybacks lead to losses, and, then, after you’ve read the article, tell me with a ‘straight face’ that you wouldn’t be absolutely outraged that you’re life’s work has suddenly become the sometimes-on-and-sometimes-off property of the People’s Republic of China.   The article actually quotes an executive at Eontec, who briefly tells of his experience with Beijing.

And on April 4, a second event (that I know about), and an ominous one, reach all of us who follow Liquidmetal intently. Now, Beijing has taken a 28.24% stake in Eontec via its sovereign wealth fund, Zhuzhou State-owned Asset Investment Holding Group Company Ltd.  Although Liquidmetal’s website states that there are no implications that come with Beijing’s stake in Eontec, I beg to differ, as the document I found certainly states that Beijing has voting rights to go along with its investment, no different from any other stakeholder.  I hope I’m not in trouble with the Liquidmetal for pointing this out.

Is it a coincidence that Zhuzhou State, a sovereign wealth fund of China, would have prior knowledge of Beijing’s upcoming decision to lift restrictions from foreign EV makers operating and selling in China?  Please…. Here’s the PDF document (document removed by source website), courtesy of China Securities Regulatory Commission (“CSRC”).  The document is written in Mandarin Chinese, but Google translate does a good job with the translation to English.

So, what’s the point?  As I stated, I foresee another ‘coincidence’.  And that coincidence will manifest as a deliberately tacit shift of assets, production, talent, strategic emphasis, revenue and profits to the jurisdiction of the U.S. and Liquidmetal Technologies, and away from Eontec.  

Beijing’s capital controls will only get worse and increasingly more punishable as the trade war with the U.S. continues.  Professor Li can see this coming as easily as I can. And does he want to risk his wealth any more than he already has on the political power games played in Beijing?  

No.  

So, those of you who question the alleged high valuation of LQMT, you don’t see the bigger picture.  As I see it, Eontec’s market capitalization of $4.2 billion is at risk, and not Liquidmetal’s capitalization of $217 million.  Over time, I predict those two capitalization rates will invert, irrespective of whether Tesla sells its EVs in the U.S., Europe or China.    Li has all bases covered.

The diary of a real $ trader,

Jason Bond

Disclosure: I am long LQMT

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3 Comments

  1. Oscar

    fascinating article. thank you for all the time you took to put it together.

    Reply
  2. Anita

    Impressive!

    Reply
  3. Tommy Renzino

    Lovely!!!❤️❤️❤️

    Reply

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