- Two exciting companies are going public… But don’t rush out to buy them…
- Uber is still scrambling for cash…
- 2021: The year augmented reality comes to life…
Dear Reader,
With every week that passes, we become more and more knowledgeable about COVID-19, how it spreads, how it doesn’t spread, and how to treat and protect against it.
Sadly, very little of this knowledge is shared with the public.
Some extensive research was published days ago out of Wuhan, China. Yes, that’s the origin of COVID-19 where this mess all started. The research, however, was interesting and valuable. The city actually tested its entire population aged six years and older.
They ran a polymerase chain reaction (PCR) test on 9,899,828 citizens at cycle threshold settings between 37 and 40. This setting is extremely high (sensitive). In the U.S., the setting is also 40. And in Europe, the settings are typically between 40 and 45.
This level of amplification serves no diagnostic purpose in terms of finding those who are currently infectious. At these levels, a PCR test will find dead remnants of COVID-19 from someone who had the virus months ago. In other words, the person isn’t infectious anymore.
The results of the research are telling.
From all the tests, no new symptomatic cases were found. The virus had run its course in Wuhan. And 300 asymptomatic cases were found.
Of the 300, 190 tested positive for COVID-19 antibodies, indicating that they had likely been infected within the last few months. The others likely had COVID-19 even further out and had already developed T cell immunity.
The most important insight, however, came from the fact that none of the samples taken from the 300 asymptomatic cases produced a live virus in cultures examined in a lab setting. This confirmed that these asymptomatic cases are not infectious.
Put more simply, people who are asymptomatic cannot spread COVID-19.
And this is precisely the problem with PCR testing with high cycle threshold values. The majority of the “positive” cases are not infectious. They are false positives, yet we are treating these cases as if they are infectious. And we are implying that the virus is spreading and out of control.
The virus is not out of control. It is our inaccurate testing that is out of control.
If we only tracked and reported on those who were symptomatic and capable of spreading COVID-19, there would be no fear and panic…
We have a “casedemic,” not a pandemic.
Worth noting is that in the U.S., we eclipsed two million tests a day last Saturday. The results are pretty meaningless, but the companies that produce and offer the tests are doing very well – sales are fantastic.
Even the World Health Organization (WHO) has recognized that asymptomatic cases are not a risk to the spread of COVID-19. Back in June, Dr. Maria Van Kerkhove from the WHO stated:
We have a number of reports from countries who are doing very detailed contact tracing. They are following asymptomatic cases, they are following contacts and they are not finding secondary transmission onward. It’s very rare and much of that is not published in the literature.
We also know through other research released last week that our body’s immune system memory of COVID-19 lasts longer than six months and most likely a lot longer.
We don’t know how much longer exactly, as we have only been managing and researching COVID-19 since the spring of this year. As the months pass, we’ll be able to track how much longer immunity lasts.
The majority of the “new cases” that we hear about every day are asymptomatic. And asymptomatic cases do not spread COVID-19. So what the heck are we doing? Why would we force healthy, asymptomatic people to quarantine for two weeks?
And for that matter, why would we force them to wear masks? We also know based on the studies from Parris Island, South Carolina, and Denmark that I shared in The Bleeding Edge that masks don’t protect the wearer from COVID-19.
The current policy response is an exercise in futility.
And we’re being told not to gather with loved ones for Thanksgiving… and now Christmas?
No, thank you. Most of us have been good team players, waiting for the scientific research to come out. Now we have it. It’s time to start making some rational decisions based on facts and scientific evidence.
And more importantly, I sincerely wish all of you a family- and friend-filled Thanksgiving holiday this week. I’ll still be working hard, but I will most certainly not be in isolation.
Now let’s turn to today’s topics…
The next two big tech IPOs are coming…
Despite the COVID-19 pandemic, 2020 has been an exciting year for technology-focused initial public offerings (IPOs).
Airbnb filed to go public back in August. Snowflake went public at 177 times sales in September. And, of course, Silicon Valley’s gem Palantir completed its direct listing on September 30.
And now we can get ready for the next two big IPOs. Both DoorDash and Instacart have recently announced plans to go public.
DoorDash is a platform that enables consumers to order food from local restaurants and have it delivered.
DoorDash makes it easy for restaurants to display their menus in a mobile format, and it will often focus on the best-selling items that provide decent margins. On the other side, DoorDash facilitates online or mobile orders from consumers and handles the delivery.
As regular readers know, I have traveled for “boots on the ground” research a fair amount since the COVID-19 pandemic hit high gear in March. Restaurants were closed for inside dining in several of the cities I visited. And in other cities, it was simply too much of a hassle to go out to eat.
So instead of venturing out, I used DoorDash frequently to have meals delivered to my hotel room. It is a fantastic service. In fact, I’m not sure what I would have done without it.
Instacart is also a home delivery business, primarily for groceries. The company provides a platform that links consumers with grocery stores and other popular businesses. Then it facilitates online orders and handles the delivery.
And here’s where it gets interesting…
DoorDash was founded in 2013. Five years later, after its Series E venture capital (VC) round, DoorDash was valued at $4 billion in 2018.
Fast forward to today, and DoorDash is a $16 billion company. It has quadrupled in value in the last 24 months.
Instacart was founded in 2012. And it was valued at $7.87 billion after its Series F VC round in 2018. Today, Instacart is worth $17.7 billion. It has more than doubled in the last two years.
Of course, this incredible growth is all thanks to COVID-19. These two companies have seen their revenues explode because of the pandemic.
That said, I must warn readers against rushing out to buy these companies after they go public… which is what many mainstream investors will do.
We will get more insight into the financial health and growth projections of these two companies as their Securities and Exchange Commission (SEC) filings are updated. But what we don’t know is how the investment banks will price these stocks for the IPOs. My guess is that it will be at absurd valuations.
And when it comes to making capital gains from investing, valuation is key.
Buying great companies at sky-high valuations is a recipe for disaster. To be successful, investors need to get both the company and the valuation right.
(And in fact, there are several other highly popular tech stocks on the verge of falling as much as 92% in the coming months for this kind of reason. I don’t want my readers to be surprised… If you’d like to see my recent interview on the state of the market… and a potential “splintering” I see taking place… go right here for all the details.)
So both DoorDash and Instacart may make great investment targets at some point. But buying them right after the IPO is probably going to be a bad idea.
Uber is dumping its self-driving division…
In April of last year, we talked about Uber’s self-driving unit, which it dubbed the Advanced Technologies Group (ATG).
At the time, Uber had just taken in a $1 billion investment from three Japanese companies – SoftBank, Toyota, and Denso. In return, those companies received 14% equity ownership in ATG, which was valued at $7.25 billion.
In a dramatic twist, Uber is now looking to dump ATG. It is currently in talks with an early stage company called Aurora about the asset.
Aurora is one of the most interesting companies in the self-driving space. It is based in Silicon Valley. And it was founded by three executives who were previously in charge of the self-driving units at Tesla, Google, and Uber. It’s a superstar management team.
Aurora was founded in 2016 with $3 million in capitalization funding. It has since raised over $760 million in venture capital. And today, Aurora is valued at just under $3.1 billion.
At a high level, let’s try and make sense of this…
How can a $3.1 billion company acquire an asset previously valued at $7.25 billion?
While we don’t know for sure, we can assume that Aurora has less than $500 million in cash on the books right now, and it needs most of that to continue managing its own product development. In other words, it doesn’t have a whole lot of money lying around for a major acquisition.
How does a deal get done? Two things come to mind.
Aurora might offer up a large chunk of equity for Uber. This would help Uber get any future operational expenses off its books while still retaining upside if Aurora does well.
And its highly likely that a deal would get done at a dramatically lower valuation than the last round at $7.25 billion. I wouldn’t be surprised at all to see a sub-$1 billion valuation for ATG, which would mean that SoftBank, Toyota, and Denso would really take a painful haircut after the last valuation.
The fact that Uber is engaged in talks with Aurora is very telling.
The ride-hailing giant is obviously in a terrible financial position right now. It is selling off its assets that won’t drive immediate revenue in a scramble to raise cash, reduce operational expenses, and shore up its finances.
And Uber is focusing on the business lines that will drive revenue right away. Namely, food delivery. That’s why it acquired Postmates back in July.
So this will be an interesting story to watch. I’m sure SoftBank, Toyota, and Denso are going to be very unhappy about the sale of ATG at a much lower valuation. We’ll see if Uber can get a deal done.
And I should add that Aurora is definitely a company we need to keep our eye on in the self-driving space. Let’s add it to our early stage watchlist.
2021 will be a banner year for augmented reality…
Chinese tech firm Oppo just announced that it will launch its augmented reality (AR) glasses next year.
What caught my eye is that these aren’t the big, bulky AR eyewear that we’ve seen in the past. Instead, Oppo’s AR glasses look like a normal pair of sunglasses. It’s a nice form factor, which is great for consumer adoption.
Here’s a visual:
Oppo’s AR Glasses
Source: Oppo
Oppo is one of the largest smartphone makers in the world, but few in the Western world have ever heard of it.
Samsung is easily No. 1 in the industry, holding 21.6% market share globally last year in terms of smartphones shipped. Huawei is number two with 17.6%, followed by Apple at 13.9% and Xiaomi at 9.2% global market share.
Oppo is just behind with 8.3% market share. That translates to 114.3 million smartphones sold in 2019.
Why is this relevant?
Well, Oppo’s AR glasses will link up with its smartphones. That’s how it was able to keep the glasses so sleek. The smartphone can provide extra computer processing power for the glasses.
This is a logical approach that makes Oppo’s AR glasses an “upsell” of sorts for consumers who use its smartphones.
As for features, Oppo was able to reduce the weight of the glasses by 75% from the original design. That speaks to the form factor.
And the glasses use a technology called time-of-flight sensors for 3D depth perception. These sensors can map out the wearer’s surroundings, allowing the glasses to “place” virtual images in a real physical space. This will be popular for gaming, but it has practical applications as well.
For example, an app could allow users to “model” furniture in their homes. The glasses would augment an empty space with the 3D image of a piece of furniture so that the wearer could see what it would look like next to their other décor.
Oppo’s glasses will also employ fisheye cameras to monitor the wearer’s facial expressions. This will power the virtual avatars that we talked about last week.
So this is a very promising approach to AR.
And most exciting to me is the fact that, if Oppo is now able to make high-tech yet sleek AR glasses, there’s no doubt companies like Apple and Facebook can do so as well. I expect we’ll see more consumer-grade AR glasses announced in the months to come.
And that tells us that the race is on. 2021 promises to be a banner year for augmented reality.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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