• Drone deliveries are coming to Dallas…
  • DC Comics is joining the NFT craze…
  • Hertz’s shift to EVs was well-timed…

Dear Reader,

It doesn’t come as a surprise that traditional initial public offerings (IPOs) plummeted in the first quarter of this year. The numbers are striking, even though the first quarter of the year tends to be the slowest:

There were only 18 traditional IPOs in the quarter, raising a modest $2.1 billion. It’s worth noting that these numbers exclude the IPOs of special purpose acquisition corporations (SPACs).

It may seem counterintuitive, but the market for SPAC IPOs was far stronger than traditional IPOs. This category experienced 55 IPOs raising $9 billion, an amount more than 4X that of traditional IPOs.

Why the difference? It’s actually simple.

When executives want to take an operating company public, they have a strong preference to do so in healthy market conditions when the IPO is more likely to be well received. The kind of volatility that we saw in the first quarter, on top of the threat of a nuclear war, is not a healthy market to go public in. 

Noisy, volatile markets like this result in lower valuations and less excitement about an IPO. As a result, if a company has the wherewithal to hold off and wait for a return to more normal – or preferably ebullient – market conditions, that’s what they’ll do.

But SPACs aren’t the same… There is no one to impress. There is no need to worry about market reception. 

After all, the IPO of a SPAC is simply the raising of capital for some anticipated future business combination. After a SPAC’s IPO, the SPAC almost always trades at the same value as the amount of cash that it holds in its trust account.

That means that the sponsors of SPACs aren’t really concerned about any current market volatility – it won’t impact where the SPAC is trading. 

The ability to raise $9 billion in the first quarter is simply an indication that SPAC sponsors and SPAC investors believe that these SPACs will find promising companies to merge with and take public sometime in the next 12–18 months.

That’s why there was such a large difference between traditional IPOs and SPAC IPOs in the first quarter of this year. And what we’re seeing right now in 2022 is a continuation of a trend that I predicted two years ago… and one that we experienced in 2020 and 2021. 

The majority of operating company IPOs are now choosing to go public via SPACs, rather than traditional IPOs. (To learn more about how I identify opportunities in SPACs for my readers, go right here.)

It is a faster, cheaper path to public markets that ultimately results in less dilution to shareholders. 

The added benefit, of course, is that exciting companies are hitting the market at earlier stages in their growth. That means normal investors have a shot at large gains… rather than the bread crumbs that Wall Street, private equity, and venture capital funds like to leave us.

Autonomous drone deliveries are coming to the suburbs of Dallas…

Autonomous drone deliveries have now launched in a major metropolitan area in the U.S. for the first time. Google’s drone delivery division, Wing, has launched commercial delivery services in Little Elm, Texas – a suburb of Dallas.

When we checked in on Wing last month, the division had just completed 200,000 commercial drone deliveries. That was a major milestone.

However, most of those deliveries happened in rural Australia.

In the U.S., Wing has only experimented on a small scale in rural Virginia. Deliveries in the Dallas suburbs will be a big jump toward operating in a more populous area.

That’s why this is a noteworthy announcement.

As a reminder, Wing’s drones are basically larger, more capable versions of the consumer drones that we can buy on Amazon… except they are fully autonomous. And they can travel about a mile a minute.

Here’s a visual:

Wing’s Drone

Source: Wing

Here we can see a Wing drone carrying a relatively small package. These drones deliver goods that are three pounds or less… and do not require any special infrastructure to operate.

When they begin a new delivery, the drones hover above their starting pad and drop a string. A crew member attaches the package to the string, and the drone reels it up and secures it.

Here’s what that looks like:

Wing Drone in Action

Source: Wing

As we can see, it’s a simple process. Somebody just walks outside with the package and attaches it, and that’s it. No special loading station is necessary.

Then the drone flies off to the delivery location, drops the package, and returns to recharge (if necessary) and get ready for the next delivery.

This is an amazing service for time-sensitive things like food, medicine, and even small household products.

And here’s the thing – if Wing can make this service work in the suburbs of Dallas, then drone deliveries can work anywhere.

What’s more, Federal Aviation Administration (FAA) regulations are standard across localities. That means Wing should not have any problem getting regulatory approval to launch in other markets.

So I expect we’ll see Wing, and other services like it, spread into many other areas across the U.S. as the year progresses. This tech will proliferate very quickly.

We shouldn’t be surprised if we see packages dropping in our neighborhoods later this year.

These NFTs provide investors with a hidden return…

DC Comics just announced that it is releasing 200,000 Batman non-fungible tokens (NFTs). The starting price will be $300 per NFT.

This certainly demonstrates that the NFT trend we’ve been tracking is still going strong.

And there’s another nuance here as well… These NFTs will provide a hidden return for investors.

On the surface, the Batman NFTs look just like digital collectibles. They are basically Batman masks with different designs and colors.

Here are a few examples:

Batman NFTs

Source: DC Comics

$300 seems like a lot to fork over for one of these images. But investors who opt in will make a great return on this initial purchase price over time.

That’s because DC Comics will employ the “digi-fizzy” concept. That’s where consumers buy a digital NFT and receive access to related physical products.

And it doesn’t stop there.

DC Comics will also offer access to special events and exclusive merchandise to NFT holders in the future. These are things that won’t be available to anyone else.

And that’s what provides investors with the opportunity for a hidden return.

We can think about it this way – there will only be 200,000 of these Batman NFTs. And if DC Comics later releases merchandise only available to NFT holders, those products will be scarce and difficult to acquire.

NFT holders could likely buy the special merchandise and then resell it at a much higher price.

It’s not unrealistic for the sale of the limited-availability merchandise to exceed the $300 initial purchase price of the NFT. And if that’s the case, it’s a good bet that the NFT itself will appreciate over time as well.

This is something most people aren’t talking about when it comes to NFTs: It’s not just about the price appreciation of the NFT itself. There are other opportunities for profit baked into the investment also, especially when the NFT has a digi-fizzy attribute.

NFTs are “layered” investments in that sense… and as such, aren’t just collectibles. There are built-in economic incentives that have profit potential. 

In that way, they are seen by many as a fun and interesting investment class in their own right. That’s why I work so hard to bring the best opportunities to my readers.

For anyone who hasn’t yet investigated this space, I’d highly encourage you to go right here to learn more.

Hertz’s move to electric vehicles (EVs) is paying off…

Rental car company Hertz just ordered 65,000 electric vehicles (EVs) from Swedish carmaker Polestar, a subsidiary of Volvo. This doubles down on Hertz’s big move into EVs last fall.

If we remember, the COVID-19 pandemic forced Hertz, an inefficient and heavily indebted company, into bankruptcy back in May 2020.

The company spent the next 14 months undergoing a restructuring process. Then it emerged last July with a plan to go electric.

Three months later, in October 2021, Hertz began to execute this plan by purchasing 100,000 Teslas. That represented 20% of Hertz’s entire fleet.

The thinking here was simple.

The total cost of ownership over time is much lower for EVs than for gas-powered cars. That’s because there are far fewer moving parts in an EV. EVs do not have any belts or hoses, which are notorious for wearing out over time.

As a result, EVs encounter very few maintenance problems. And they rarely break down. That makes them perfect for the car rental business.

The primary constraint with EVs is their range and the time it takes to recharge the battery.

High-end EVs can now travel 350–400 miles on one charge. But they are also more expensive. Less costly EVs may only have a range of 250 miles.

Then it takes 20–30 minutes to recharge the battery – and charging stations are still fewer and farther between compared to gas stations, which means some planning is necessary.

For consumers looking to purchase a vehicle, this is a pain point. Most people don’t want to have to stop for 30 minutes at a charging station every 250 miles.

However, car renters typically aren’t driving vehicles for long distances. In most cases, renters only need a car to get around a city for a few days at a time. 

Those who use rental cars for such a short period of time will typically drive less than the available range on the car, so there isn’t any need to worry about recharging.

I applauded Hertz’s move into EVs last October for these reasons. It was the first rental company to think outside the box like this.

But Hertz certainly wasn’t predicting what happened next…

As we know, the price of oil has skyrocketed in the U.S. – due to a policy-driven reduction in domestic oil production, as well as egregious monetary policies.

Ironically, the war in Eastern Europe was just the icing on the cake. As I write, Brent crude oil is 51% more expensive than it was around last Thanksgiving.

Of course, that’s caused prices at the gas pump to soar as well… making gas-powered cars more expensive to drive. This makes EVs a lot more attractive by comparison. Who knows, maybe this was all intentional?

Add it all together, and Hertz’s shift to EVs was timed very well.

It’s great for marketing, but the reality is, it’s going to save Hertz money operationally. There’s no question that this will push the other major car rental companies to move toward EVs as well.

Whether or not we believe that there is some devious master plan, or that this migration to electric vehicles is a natural progression in automotive technology… it’s happening now. And the shift is accelerating for a large number of reasons.

That means opportunities for investors… and that’s why I want to point my readers in the direction of a company providing key components for these EVs… Go right here for the details.

Regards,

Jeff Brown,
Editor, The Bleeding Edge

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