• Investors should keep their ears tuned to the biotech sector
  • 164 million Americans wear glasses… But that’s no problem for augmented reality
  • This proposal could change the private investing picture…

Dear Reader,

Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.

If you have a question you’d like answered next week, be sure you submit it right here.

To finish off the week, I wanted to share some environmental data that I was reviewing earlier this week. Specifically, data concerning global carbon dioxide (CO2) emissions.

In early April, global CO2 emissions dropped by 17% compared to pre-pandemic lockdown levels. That was the point just as China began its return to normal and the rest of the world was mostly on lockdown.

This is the largest drop in CO2 emissions since World War II… or maybe ever. The primary reason for the dramatic decrease won’t be a surprise… a massive decrease in passenger vehicle traffic.

The numbers are estimates based on a variety of data points, but they are certainly representative of what we all have seen on a global level.

While the world’s economies can’t, and won’t, sit still in an artificial effort to keep emissions at a decreased level, I believe that having experienced the lift of pollution and the reduction in emissions will act as a catalyst to accelerate the adoption of clean energy like solar and nuclear fusion.

That way, the world can fuel our electric vehicles (EVs) with clean energy, not with energy produced from carbon-based fuel sources. After all, if we are fueling our EVs with electricity produced from natural gas or coal… what’s the point?

It’s even worse when we consider that about 7% of that electricity is lost when transmitted from a power plant to our homes or charging stations.

I’m excited about a renewed effort to pick up the pace of technological development as it pertains to clean energy production…

And please don’t forget, the Space X Falcon 9 launch we mentioned on Wednesday is rescheduled for Saturday at 3:22 p.m. ET!

Another day, another COVID-19 test…

For our first question, a reader wants to know more about this company developing its COVID-19 test…

Hello, Jeff,

Really enjoy all of your insights across the technology spectrum. I have recently come across CODX – it claims to have highly effective COVID-19 testing technology that seems to be getting some traction in the U.S. and some foreign markets. Its Logix Smart COVID-19 test kit produces 100% sensitivity and 100% specificity in identifying SARS-CoV-2 without showing any cross-reactivity with other coronaviruses. And it has been granted emergency use authorization (EUA) by the FDA. Would you have any insight or opinion on CODX? Thanks in advance,

– Felix E.

Hi, Felix. Thanks for writing in. Co-Diagnostics (CODX), the company you’re referring to, is a molecular diagnostics company out of Utah with a unique platform for developing diagnostics tests. That’s especially relevant due to the COVID-19 pandemic.

And like you mentioned, at the beginning of April, its Logix Smart Coronavirus COVID-19 Test received an EUA from the Food and Drug Administration (FDA). Its test uses the company’s patented CoPrimer technology to detect the presence of RNA from COVID-19.

And just this week, Co-Diagnostics released a peer-reviewed paper showing that its test was able to detect the virus in the cancer tissue of patients even before symptoms began to show.

This is definitely promising, but I can’t speak to any specifics about the company right now, as I haven’t researched Co-Diagnostics. What I will say, however, is that this company was worth only $14 million at the end of last year. Now it carries a valuation of $464 million.

This is highly speculative money at these levels right now for a company that barely had any revenue last year. And as I have written before, I believe that by this time next year, COVID-19 will be a bad memory for most.

In other words, there won’t be much need COVID-19 tests a year from now, and the market is already flooded with tests. There are so many test kits available, the U.S. market can’t even use them all.

I predict that there will be a washout of companies that will crash from their highs as the market understands these basic supply-and-demand dynamics, which will unfold within the next 6–12 months.

The smart companies will use the run-up in share prices to raise additional capital so they can fund research for other diagnostics or therapies.

But there is something extraordinary that has already come out of this whole pandemic…

The biotech industry demonstrated remarkable agility in its ability to propose, develop, and deliver products and therapies in record time.

This is already transforming the biotechnology industry. Venture capital and private equity can see the sudden potential of bringing new biotechnology to market in weeks, not years.

This will usher in record levels of financing for strong biotechnology companies that have the potential to deliver at these accelerated rates rather than the “old way” of developing drugs and vaccines.

And I’ll make sure readers of The Bleeding Edge know about any promising opportunities in the coming months. Stay tuned…

Don’t worry: Apple Glasses will offer vision correction options

Next, we have a reader wondering whether all consumers will be able to use Apple Glasses…

Dear Jeff,

Many thanks for all the research you do. It is greatly appreciated. I subscribe to all three of your investment advisories. My question concerns new “smart glasses” such as those you expect to be launched by Apple in the medium term. I routinely wear regular spectacles for vision correction, especially with one eye being stronger than the other. I need two different pairs, one for regular use and one for reading.

Do you anticipate that these new smart glasses products will have adjustable vision correction built-in? I love the concept, but without this, the product would likely be unusable for many consumers like me. Thank you for your explanations.

– Liam M.

Hey, Liam – thanks for your question and for subscribing to my research services. For those who missed it, I wrote about the upcoming release of Apple Glasses last week. These will be Apple’s augmented reality (AR) glasses, which will be able to overlay video, images, and data on top of the user’s actual surroundings.

Regular readers know that I believe AR glasses will be the next mass-market consumer product. And I even think they will eventually replace our smartphones entirely. I can’t wait to see the finished product from Apple.

As we know, Apple develops products that are elegant in design and simple to use. And from what we now know, the appearance of Apple Glasses will likely look very similar to a normal pair of glasses.

And rest assured, Liam – these glasses will also be functional in the usual sense…

After all, around half the world’s population uses some form of vision correction, and approximately 164 million Americans wear glasses already. So it only makes sense for Apple to take that into account. Otherwise, it would be missing out on about half of the addressable market.

According to the latest news, it looks like Apple will offer the glasses frames for around $499, with an additional fee for prescription lenses. Given that Google Glass and Microsoft’s HoloLens 2 debuted at $1,499 and $3,500, respectively, this is a far more reasonable price point to drive mass adoption.

Not surprisingly, this is right around the range that Apple priced its Watch, which made Apple the most successful watch company in the world.

There is also precedent for this as well. Focals, a pair of AR glasses by North, already has prescription options.

And while not AR glasses, Amazon sells prescription Echo Frames that incorporate Alexa capabilities into the glasses. This is a neat product, as I’ve been predicting that a key user interface for AR glasses will actually be voice.

As I mentioned before, Apple’s June developer conference will likely give us a clearer picture of what Apple has planned for the release. I’ll be sure to update readers on any new developments…

Private companies offer the most explosive gains…

Let’s conclude with a question about Reg A+ offerings…

Jeff,

I have been a member of your Exponential Tech and Early Stage Trader services for a few months now and have benefited greatly from your research. I’ve been able to build positions while the market crashed and actually have significantly higher gains than your portfolios, but I wouldn’t have even known about these opportunities without the services.

While Early Stage Trader is more of a short-term gain service, have you considered recommending Reg A+ opportunities? It seems like while we have to hold for much longer, potentially, there are very explosive gain opportunities there, especially on those offerings that include warrants.

– Ken K.

Hi, Ken, and thanks for being a subscriber. And congratulations on the gains. It’s great to hear about investors taking advantage of market pullbacks like this and showing even better returns than the model portfolio.

You’ve hit on one of my favorite topics, which is investing in early stage companies. And it is also one of my biggest headaches due to current SEC regulations around crowdfunding.

I’ve written before about Regulation A+ and CF deals. In fact, just this past March, the Securities and Exchange Commission (SEC) proposed major changes to crowdfunding regulations.

As regular readers know, the best early stage investments have typically been reserved for connected venture capitalists and high-net-worth investors. Everyday investors have been left with the scraps. But the new proposal could change all that…

The proposal would raise the offering limit on Regulation Crowdfunding (Reg CF) deals from $1.07 million to $5 million. That means an early stage company could raise up to $5 million every year. And for companies looking for even more capital, the Tier 2 offerings under Regulation A (Reg A) would see the limit raised from $50 million to $75 million.

Both Reg CF and Reg A deals permit private early stage companies to sell shares directly to all investors, including non-accredited investors. These regulations were developed under the 2012 JOBS Act as a way to provide normal investors access to the same kind of investments as accredited investors.

But it didn’t work out that way. The regulations, as written, didn’t accomplish their goal. In general, the structure of these offerings simply hasn’t attracted high-quality early stage companies.

The Reg CF deals have been fairly inexpensive to conduct and don’t require too burdensome filing requirements, but the limit of raising $1.07 million in any 12-month period usually isn’t enough runway for even a year of funding.

And Reg A/A+ deals are very burdensome in terms of regulatory filings. It’s almost the same as conducting an initial public offering. Very few small, early stage private companies can afford the legal fees to get through the process. And even if they could, they don’t have the money to market the deal.

This has resulted in a very limited number of high-quality Reg CF deals and even fewer high-quality Reg A deals.

This is a problem that I have been looking to help solve, and the upcoming regulatory changes, if approved, will help me do exactly that.

If Reg CF deals have a new cap of $5 million, for example, they will suddenly be attractive to early stage companies. With a successful raise, that can be enough to fund two to three years of development.

And as for including these types of deals in my current products… I have long wanted to produce a research product focused on private early stage investing. There just haven’t been enough great private deals available to non-accredited investors due to these regulations.

And I simply won’t compromise on the quality of my recommendations.

But that changes if this proposal goes through. I’m hearing that this could happen by the fourth quarter of this year. And that has my gears turning about a new private investment service.

The format of the research service would likely be different than my other services that focus on publicly traded companies. We wouldn’t have sell alerts. These early stage private investments would basically be illiquid.

Investors would typically hold shares in the company until there was an exit, which could take five years or longer. (This allows us to win in another way, however: In the U.S., the Internal Revenue Service has a special code, section 1202, which makes all capital gains for investments that have been held for five years or longer tax-free.)

Buy alerts would be entirely driven by when I find exciting investment opportunities that are raising a Reg CF or Reg A deal. So this wouldn’t be a regularly scheduled monthly research service. I might have one recommendation one month and three the next.

So yes, this topic is definitely of interest. I’ll be sure to keep readers updated…

That’s all we have time for this week. But if you have a question that you’d like answered in next week’s mailbag, be sure to submit it here.

Have a good weekend.

Regards,

Jeff Brown
Editor, The Bleeding Edge

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