The SEC Will Allow Companies to Raise Capital Through Direct Listings

• This is a huge win for companies ready to IPO…
• Walmart’s frantic attempt to keep up with Amazon…
• The largest smartphone refresh cycle in history is happening right now…

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Dear Reader,

Since we took a close look at the widespread availability of vaccines yesterday, I thought that we’d have a close look at another hot topic over the last two weeks – the availability of hospital beds in the U.S.

I was concerned when I kept seeing media articles proclaiming the “disaster” of overflowing hospitals. Of course, what really matters are the facts.

The chart below is taken directly from the U.S. Department of Health and Human Services (HHS). The data is current as of this Monday, January 4. The far right column represents the percentage of beds currently occupied at a national level.

National Estimate of Occupied Hospital Beds Across the U.S.

Source: HHS Protect, U.S Department of Health and Human Services

As we can see from the data, only 17.74% of all inpatient beds are occupied by COVID-19 patients. And we can see that 71.34% of inpatient beds are occupied in total.

What is more interesting, however, is that just 63.18% of ICU beds are occupied. That means that almost 37% are unoccupied and available. This is starkly different from the headlines that I read over the holidays.

But of course, each state can be different.

So I wanted to take a look at one of the “crisis” states that has been getting a lot of press coverage – California. Again, according to HHS the occupancy of ICU beds is at 88% right now. That means about 12% of ICU beds are still available.

We should keep in mind that during some of the past bad influenza seasons, occupancy has been higher than that – even at capacity.

But I wanted to dig even deeper. How about at a county level? What’s the worst hit county?

Los Angeles County, of course. I checked directly with Los Angeles County’s Department of Public Health. The ICU occupancy is 90%. That means 10% of ICU’s remain empty, and only 36% of ventilators are being used (fortunately).

Taken directly from the source, this information is starkly different than the headlines. And it’s also great news. The national health care system does have the ability to support more patients if needed.

The reality is that if someone needs an ICU bed in Los Angeles, it is available. It may not be the nearest hospital, but there is availability in surrounding hospitals. The one major concern I have is that hospitals are still incentivized to admit COVID-19 patients.

A hospital receives a $20,000 bonus for every confirmed or presumed COVID-19-infected patient. This can cause a perverse incentive for an individual hospital to have people wait in lines to be admitted rather than transferring or sending to a surrounding hospital where there is availability. This is precisely the behavior that we saw in the spring at hospitals like Elmhurst in New York.

Now let’s move on to today’s insights…

The best news for normal investors in 2021…

We have talked many times in these pages about how initial public offerings (IPOs) are controlled by the investment banks. This is typically to the detriment of both the company going public and normal investors. The banks shop the IPO to large institutional investors, set the price, and allocate pre-IPO shares behind closed doors.

And the investment banks typically underprice the IPO to boot. By doing this, the company going public raises less capital than it could have, and the investment banks and their clients make out like bandits with an artificially low price on the stock.

And by the time the stock is listed on the exchange for trading, its price has exploded higher. The stock will open on the market far above the set IPO price. Normal investors have the option of buying at the elevated valuations or passing on the IPO.

A direct listing circumvents that entire process.

With a direct listing, the company just lists a portion of its existing shares for trading. Then existing shareholders can sell their shares on the public market, and normal investors can buy those shares.

The problem with direct listings is that they have historically restricted companies from issuing new shares to raise capital at the time of the direct listing. That’s been a terrible limitation, and one of the key reasons that there have been so few direct listings in the past.

It has meant that only private companies that didn’t need to raise money could afford to bypass the investment banks with a direct listing. And the list of those companies is very small. Most private companies go public because they need more capital to grow.

The great news is that this just changed.

On Christmas Eve, the Securities and Exchange Commission (SEC) approved the New York Stock Exchange’s application to allow companies to do a direct listing and issue new shares at the same time.

This is a huge win for private companies and for us as investors.

We will see far more direct listings this year than ever before. These listings will be priced fairly, and they will be available to normal investors right from the start.

That will present us with a larger range of potential investment recommendations in our premium research services here at Brownstone Research.

And I should point out that this is something that the Council of Institutional Investors tried to block last August. This is a group representing investment banks, large institutional investors, and other related corporations, which have historically profited greatly from the traditional IPO process.

Fortunately, the SEC denied the Council’s objection. It’s a great move by the SEC that will benefit us all.

So I’m very excited to see what 2021 brings in terms of new direct listings. This will be one of the biggest trends in capital formation this year and a great option for private technology companies wanting to go public on their own terms.

Walmart’s push into autonomous deliveries…

In another major development on the self-driving front, Walmart just announced that it will start using autonomous vehicles to make deliveries this year. This is a long time coming.

Walmart is working with a self-driving startup called Gatik to make this a reality. For the last 18 months, the two companies have piloted a program to shuttle goods from Walmart’s distribution centers to its retail stores using self-driving trucks with a safety driver.

The pilot program has racked up more than 70,000 miles in fully autonomous mode. And now the company believes it is ready for prime time. This year, it will remove the safety driver.

Walmart will start by rolling out this program for autonomous deliveries between distribution centers and retail stores across the country. And the next step is to use these self-driving vehicles to deliver goods directly to consumers. That’s the big picture.

Of course, this is all in a frantic effort to keep up with Amazon.

Walmart knows that the only way it will be able to compete with Amazon is to keep costs as low as possible. And the single biggest cost associated with these deliveries is human labor. By eliminating the need for delivery drivers, Walmart can have a shot at competing with Amazon’s incredible logistics network.

This will be transformational for Walmart. And it is incredibly bullish for self-driving technology.

We talked yesterday about Amazon’s ride-hailing service featuring Zoox’s self-driving vehicles. We can expect to see that service expanded to home deliveries at some point as well.

So here we have two of the largest companies in the world aggressively working with autonomous vehicles and self-driving technology to get the tech ready for widespread commercial deployment. It will be exciting to see this all come together this year.

Apple’s 5G-enabled iPhone is taking off…

For years, I have been saying that the launch of Apple’s 5G-enabled iPhone – the iPhone 12 – would lead to the largest smartphone refresh cycle in history.

And the reason is simple. This is the first time in many years that the next-generation iPhone has a new technology that dramatically improves the capabilities of past iPhones.

Well, it appears my prediction will prove to be correct.

Over the holidays, Apple increased its forecasts for iPhone 12 sales in 2021. The company is now planning to manufacture and sell 230 million iPhone 12s this year. I wouldn’t be at all surprised if the number is even higher by the end of the year.

It will likely surpass the previous record of 231 million new iPhones shipped back in 2015.

That won’t come as a surprise to readers of The Bleeding Edge. But what is surprising, even to Apple, is the heightened demand for the iPhone 12 Pro and iPhone 12 Pro Max.

That’s because these are the two high-end iPhone 12s. Naturally, they are more expensive than the mid-range and low-end models. And consumers usually favor the cheaper options during smartphone refresh cycles.

Of course, what separates the iPhone 12 Pro and Pro Max from the other iPhone 12 models is the light detection and ranging (lidar) sensor. This is the 3D-sensing component that can perceive depth and map out a room.

The lidar sensor will make the high-end iPhone 12 great for augmented reality (AR) functions.

And the widespread adoption of these phones will speed up the development of new AR smartphone applications. That’s incredibly exciting! It is also bullish for companies that manufacture these 3D sensors for smartphones.

Some of these AR apps will be for gaming. And others will help facilitate shopping and e-commerce. Once discovered, consumers will find them very useful.

In fact, the simple “Measure” app that comes standard on the iPhone 12 is already incredibly useful. It allows users to measure the height and width of a particular object or empty space using just the phone. No more fiddling with a tape measure.

I’m very excited to see what other apps are released in the coming months.

And the success of the iPhone 12 has been a major boon for Apple.

Most people don’t realize this, but historically Apple tends to only hold 12–13% global market share in the smartphone industry in any given quarter. Android phones in fact have a near monopoly share.

But with the iPhone 12 sales coming in, Apple quickly jumped to 20% market share. That’s great news for the company. And it is very bullish for technologies like AR, lidar, and 3D sensing.

Apple’s success will force Android smartphone makers to quickly adopt these technologies in next-generation smartphones as well. That means the companies working on this tech and supplying the components will continue to be great investment targets this year.

Regards,

Jeff Brown
Editor, The Bleeding Edge

P.S. Don’t forget about my Pre-IPO Code event next Wednesday, January 13, at 8:00 p.m. ET. This could very well be the biggest event of my entire career.

That’s because I am going to pull back the curtain on the “revolution” that’s quietly sweeping the IPO market. And I’m going to reveal a way for normal investors to get access to pre-IPO shares right from their existing brokerage account. No minimums. No lock-ups. No restrictions.

All you have to do is type in a “pre-IPO” code and press buy. It’s that simple.

Yet this technique will enable us to get access to some of the most exciting private companies on the planet before they go public.

It’s a new way of investing that could greatly amplify the gains a savvy tech investor realizes going forward. And I want all readers of The Bleeding Edge to have this tool in their investing toolbelt.

So please join me next Wednesday, January 13, at 8:00 p.m. ET for my Pre-IPO Code event. We are going to kick off 2021 with a bang. Simply go right here to reserve your spot.

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