- 5G and our overloaded networks…
- One way companies lay the groundwork for growth
- Invest in this trend as soon as you can…
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.
Our networks vs. the exponential growth of data…
First, we have a follow-up question to our discussion of the exponential growth of data on our wireless networks…
Hi Jeff, I am an avid reader of The Bleeding Edge and appreciate the advance knowledge of what is coming. You recently answered a question about 3G, 4G, and 5G and showed how much growth is happening with data. It seems to me that with all the exponential growth of data, the 5G system will also begin to overload sooner rather than later. What do you see coming that will accommodate this? The Donald has set the development of 6G in motion. What is the state of 6G at present, and when do you see it coming on stream? And what will be the areas of the new technology for 6G to operate? Thanks again for your work in these areas.
– Ian S.
Ian, you’re absolutely right. Once technology companies have 5G wireless connectivity, speeds, and low latency to work with, they are going to make technology services that take advantage of this technological revolution.
There will be an exponential growth of services/applications over 5G wireless networks. And consumer and enterprise usage of those services will grow exponentially as well.
Year after year, we’ve watched the wireless industry underestimate how fast data traffic will grow over wireless networks.
But the industry knew enough after the transition from 3G to 4G wireless technology to make a major upgrade with 5G wireless technology.
Much larger blocks of radiofrequency spectrum have been allocated to 5G compared to 4G, and a completely different network architecture was designed, all resulting in a revolutionary improvement in wireless technology.
In reality, it’s too early to talk about 6G right now. Conceptually, the discussions are around another massive improvement in speed.
6G is expected to operate at 1 terabit per second compared to 5G’s gigabit per second. We also know that the 6G wireless network architecture will look much more like 5G – a small cell network.
We should keep in mind that it will take another 10 years of industry work developing the standards for 6G before the new networks begin phase one, the infrastructure build-out.
For now, as investors, we’ll stay focused on profiting from the 5G wireless boom. And as consumers, we are already starting to enjoy the real thing… revolutionary 5G wireless technology. 2020 is going to be a fantastic year.
What doubling the number of shares means for a company…
Up next, a keen-eyed reader writes in to ask about share dilutions…
Hi Jeff, my name is Feruz, and I live in Mountain View, CA. I am a lifetime member of Near Future Report and Exponential Tech Investor. I also signed up for Early Stage Trader this year. I am really grateful for all your hard work and your insights on technology companies, and I feel very lucky to be a member of all your services. I have a question regarding one of our portfolio companies. It is proposing to double the number of common shares from 45 million to 100 million. I was wondering, What is the goal of this proposition? I am worried that this dilution of the number of common shares will negatively affect the stock price. I will really appreciate your thoughts on this.
– Feruz K.
Hi, Feruz, and thanks for writing in. You have a great eye to catch this. While I can’t mention the name of the company in The Bleeding Edge, I’ll use this as an example of what often happens in high-growth, small-cap technology stocks. In order not to reveal the actual company’s name, as it’s a current recommendation in Exponential Tech Investor, I’m just going to call it “Company Z.”
For those interested in seeing what Feruz was referring to, here it is:
Companies often increase their number of shares in anticipation of raising additional capital. It also helps create a more liquid company that can provide more investors access to the stock.
A simple example would be if there are one or two large institutional investors that want to take a meaningful position in Company Z. Company Z creates additional shares and agrees to sell a certain percentage of those new shares to the institutional investors.
Company Z has not yet announced a secondary offering… But this makes it clear that one may happen in the coming months. Given the current burn rate, Company Z will need to raise cash while it works toward scaling up manufacturing and sales.
That said, Company Z isn’t likely to issue all 55 million new shares at one time (assuming the vote passes).
In fact, the company doesn’t have the current 45 million shares outstanding right now. There are only about 30.5 million shares outstanding today (i.e., the number of shares of Company Z’s stock currently held by all its shareholders).
So Company Z is just laying the groundwork for future growth and new investors. And I suspect the dilution from its next secondary offering won’t be nearly as big as it could be. Typically, what we see in this kind of situation is a secondary offering that results in dilution of about 10–20%.
If it were me running the show, I would have a major win ready to announce before finalizing any secondary offering plans. I would push out the good news, maybe get back on CNBC for a segment, and watch as the stock price rose significantly.
Then, I would announce the secondary offering on the back of that momentum to minimize the market’s negative reaction to it.
And just to be clear, this does not change my outlook on Company Z whatsoever. This is an incredible company. I suspect it will be one of the best performers in our Exponential Tech Investor portfolio when it’s all said and done.
So I’m not concerned with a quick run-up and then a potential 10–20% dilution. After all, we’re investing in company like this because we are expecting long-term, triple-digit capital gains with the potential for a 10x return.
(Again, I can’t name the specific recommendation here. But for any readers interested in joining Exponential Tech Investor, you can learn more here.)
The biggest medical breakthrough since antibiotics…
Let’s conclude with a question about investing in CRISPR genetic editing companies…
Jeff, I really appreciate your informed style of making complex tech very understandable. My question has to do with the two CRISPR recommendations in your Exponential Tech Investor portfolio. We hear a lot about various companies using CRISPR technology to potentially achieve incredible medical breakthroughs. Will your two recommendations in this space benefit from these other companies using this technology?
– Michael G.
Thanks for the question, Michael. Great to hear you’re enjoying the research.
I have been pounding the table on CRISPR genetic editing technology for years. I first put it on my readers’ radars back in late 2015. But I’ve been tracking and studying the technology for much longer than that.
For newer readers just joining us, CRISPR genetic editing technology allows us to “program” plant, animal, and human DNA as if it were a piece of software.
We can “fix” or “edit” mutated genes that are the source of disease. And in the case of agriculture, we can even modify a plant’s own DNA to make a crop more drought- or pest-resistant.
We should keep in mind that there are more than 6,000 human diseases caused by genetic mutations. Even worse, more than 95% of these have no approved therapy or treatment. Well, CRISPR has the potential to cure, not just treat, every single disease of a genetic origin.
And we have been covering CRISPR extensively in the pages of The Bleeding Edge. In the past few weeks, I’ve shown you how CRISPR can be used to effectively target cancer cells… how “prime editing” was shown to make 44 DNA corrections at one time… and how CRISPR may have even cured sickle cell disease.
I simply can’t say this enough: CRISPR will be the biggest breakthrough in medicine since the creation of antibiotics. And yes, it has the potential for once-in-a-generation returns.
Michael, I can’t give personalized investment advice or mention any specific company names in the Exponential Tech portfolio here… But this is what I’d say to all my readers of Exponential Tech Investor. Use both hands to pick up shares of our two CRISPR-related recommendations as soon as you can. (Paid-up subscribers can catch up on these companies here and here.)
These two companies have the most important foundational intellectual property in CRISPR genetic editing technology. Other companies that develop therapies will eventually have to license patents from those two companies. Otherwise, they’ll end up in a painful and expensive patent lawsuit.
On a similar note, I have been predicting that the key patent holders in the industry will eventually get together and establish a patent pool for CRISPR genetic editing technology. This will allow any biotechnology or pharmaceutical company to simply sign a licensing agreement to use the patents in the pool.
This will greatly simplify access to intellectual property, facilitate license fees, and accelerate innovation in genetic editing, which we all want. We want to cure all human disease as soon as we can.
And be sure you keep reading The Bleeding Edge. I’ll update all my readers on the biggest CRISPR breakthroughs as they happen.
Regards,
Jeff Brown
Editor, The Bleeding Edge