Dear Reader,
Capitulation.
As I predicted, Intel just couldn’t sell its desired valuation for the forthcoming Mobileye IPO.
We had a look at Intel’s plans a few days ago, on October 11. Intel was originally looking to spin out Mobileye at a $50 billion valuation.
Remember, Mobileye is a semiconductor company for advanced driver assistance systems (ADAS) that Intel acquired for $15.6 billion in 2017.
By the time of its IPO filing, the expectation of valuation had lowered to around $30 billion. As I wrote on the 11th:
That’s a valuation of 17.7 times annual sales… for a semiconductor company. For comparison, Intel trades at an enterprise-value-to-sales multiple of 1.61. And NVIDIA, the most valuable semiconductor company in the world, trades at an enterprise-value-to-sales multiple of 10.5.
Intel is dreaming.
Yesterday, Intel announced the targeted valuation has dropped to around $16 billion, representing about a two-thirds decline from its original expectations. Ouch. That must hurt.
But even a $16 billion valuation appears unrealistic. I certainly wouldn’t be a buyer.
Rather than being grounded in a solid valuation, $16 billion is more of a number that would allow Intel to conduct the IPO at a level just above where it bought Mobileye back in 2017. To save face?
That’s like ascribing the valuation multiple of NVIDIA, the most valuable semiconductor company in the world, for a less attractive business. Put more simply, NVIDIA isn’t an appropriate comparable to set the valuation of Mobileye.
Wall Street knows that, but that doesn’t mean it won’t sell it.
A more appropriate valuation for the IPO would be in the $8 billion to $9 billion range. That means if the IPO does happen at $16 billion, there’s significant downside ahead in the next six months. It also means that we have a good idea of when we might consider building a position in Mobileye… when it hits that valuation range.
Of course, we’ll have a lot more information to make an even more informed decision after the company goes public, and after we’ve reviewed at least one or two quarterly earnings reports.
Until then, we’ll sit back and watch the fireworks and avoid being taken for a ride…
Cassie from Agility Robotics is back in action.
Regular readers may remember Cassie. Agility Robotics has been working hard to optimize this bipedal robot for movement.
The last we saw of Cassie, it had just completed a 5K marathon. The robot finished in about 53 minutes on a single charge. Not too shabby.
Well, it seems Cassie has since been training for sprints. And it just set a new robot record for the 100-meter dash. Here’s the footage:
Cassie Runs the 100-Meter Dash
Source: Agility Robotics
As we can see, Cassie had no problem completing the sprint, clocking in at 24.73 seconds. That’s the new world record for the fastest 100 meters by a bipedal robot.
For comparison, the human world record set by Usain Bolt for a 100-meter dash is a mind-boggling 9.58 seconds. But this wasn’t meant to be a human-versus-robot race.
What makes this interesting is how Cassie “trained” to gain speed.
Agility Robotics used a form of artificial intelligence (AI) called machine learning to allow Cassie to essentially teach itself to run.
That is to say, the robot didn’t use any human running techniques in its training. Instead, it started from scratch to identify the optimal approach to running for speed.
Notice the approach Cassie came up with looks an awful lot like how humans run. So the AI’s optimal conclusion was remarkably similar to how we’re already wired to move. I find that fascinating.
As neat as this is, readers may wonder how a robot sprinting around a track is relevant in the real world…
To me, the most obvious answer is that Agility Robotics has developed an optimized delivery robot. If we add a pair of “arms” and “hands” with an opposing digit, Cassie becomes a fantastic last-mile delivery robot with the dexterity and agility to handle most kinds of packages.
I can just imagine a UPS truck pulling into a neighborhood and parking. The back doors pop open and three or four of these robots hop out, packages in hand.
They take the packages to the proper house, leave them on the doorstep, perhaps even ring the doorbell, and then run back to the truck. Then they move on to the next delivery stop.
This would be transformational for the logistics industry, as robots could perform a task that’s tiring, repetitive, and hard on the human body over time.
Additionally, new jobs will be created to maintain and service these kinds of robots, as well as expanding the logistics and distribution networks that can take advantage of lower cost of delivery.
Delta Air Lines just invested $60 million to secure a 2% stake in electrical vertical take-off and landing (eVTOL) startup Joby Aviation. This is a company longtime readers know well.
We’ve talked about Joby several times in these pages. For the sake of new readers, Joby developed air taxis that can fly at speeds up to 200 miles per hour. And they can travel 150 miles on a single battery charge.
Here’s a look at Joby’s eVTOL in action:
Joby Aviation Vehicle
Source: Joby Aviation
Joby’s eVTOL aircraft is one of the most advanced in the industry in terms of development. In fact, Joby already received its air carrier certification from the Federal Aviation Administration (FAA). That means it has regulatory approval to begin commercial operations.
So Delta is securing a material stake in one of the leaders in the race to launch air taxis. The airline’s goal is to provide air taxi services initially to its customers in the Los Angeles and New York metropolitan areas by 2024.
This makes perfect sense. When we think about L.A. and New York, they’re both notorious for traffic.
But what if travelers could simply catch an air taxi from their local vertiport to the airport itself and avoid all that traffic?
Then they could connect with their flight and take another air taxi from their destination airport to their hotel’s rooftop vertiport. Again, avoiding all traffic in the process.
Services like these will transform air transportation and remove several of the pain points in commercial air travel. And as we saw last week when we looked at Wisk Aero, at roughly $3 a passenger mile, this kind of service will be widely affordable. I believe we’ll see eVTOL adoption explode once consumers catch on to this.
And that’s why the big airlines are piling in.
In addition to Delta, we’ve seen both United Airlines and American Airlines making material investments into eVTOL companies to establish partnerships, as well as advanced orders to secure their own eVTOL air taxis.
So the three largest airlines in the U.S. are going big on air taxis. The eVTOL companies already have their commercial prototypes in the air, and the airlines are lining up their partnerships in preparation for launching these new services. That’s how we know this is real.
We’re watching the birth of a brand-new industry in real time here. I can’t wait to see these air taxis live and in person.
We’ll wrap up today with an interesting development on the non-fungible token (NFT) front. The Securities and Exchange Commission (SEC) is now investigating Yuga Labs.
Yuga Labs is the corporation behind the Bored Ape Yacht Club NFT series. And Bored Apes are arguably the most well-known NFTs to date. Here’s an example below:
Bored Ape Yacht Club
Source: NFTS.WTF
Bored Ape NFTs are primarily just digital art. Each NFT is simply a unique image. No two are the same.
But ownership of a Bored Ape also confers the rights to commercialize that Ape. And the collective ownership of all Bored Apes could become financially beneficial as the brand is leveraged for potential revenue streams.
Owners of Bored Apes also have interest in ApeCoin – Yuga Labs’ own cryptocurrency. This is what makes the SEC’s investigation so interesting.
If the value of a Bored Ape was purely in the form of digital art, I don’t think the SEC would have a case at all. But if we apply the four-pronged Howey Test to these NFTs, it’s easy to see what the SEC is getting at.
I’m not suggesting that this implies that Bored Ape NFTs are securities. But with a bit of overreach, we can imagine how the SEC might try to position these NFTs as a security.
For context, the Howey Test has its roots in a 1946 Supreme Court case. It says something is a security if investors put money into a common enterprise expecting to generate a profit thanks to the effort of others.
Looking at Bored Ape NFTs, three of the test’s four points are accurate. Investors put money in. They expected to profit (as did the management of Yuga Labs). And the NFTs were developed and gained market value thanks to the effort of others.
The only question then is whether Bored Ape NFTs constitute a common enterprise. After all, these NFTs don’t convey ownership interest in Yuga Labs or any other company. There’s no equity involved.
I suspect the SEC will make the case that the Bored Ape series of NFTs is, in fact, a common enterprise because owners receive certain branding rights. That could be construed as enterprise rights. And the SEC will probably further argue that ApeCoin itself, which owners of the Bored Apes received, is a security.
On the other hand, Yuga Labs will argue that it’s just a digital art collection. And how can a digital art collection – with completely unique pieces of art – be a common enterprise? Yuga will probably try to further argue that ApeCoin is a utility token with no expectation of a profit – but good luck with that argument.
So this is absolutely a case to watch going forward. Given how antagonistic the SEC has been toward the digital assets industry, I suspect it will take some time to play out.
I’m also noticing a pattern here…
The SEC has gone after some of the largest, best-in-class, buttoned up digital asset companies like Ripple Labs and Coinbase. These are two successful, well-known companies in the industry.
And now the SEC is going after the most recognizable NFT series. Clearly, that’s its approach. It’s all about notoriety. Perhaps that’s to send a message to the entire industry.
My preference would be for the SEC to focus on all of the bad actors in the industry, not the players that are doing their best to follow the rules and regulations as they exist today.
Either way, I’m going to be tracking this case closely. How it unfolds will have major implications for NFTs going forward.
Regards,
Jeff Brown
Editor, The Bleeding Edge
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
