Dear Reader,
Thank you to those who took the time to join me for my Penny IPO presentation last night.
We are living in an age of rapid technological development, driven by some incredible early stage companies. This should be the best climate in history for investors.
But it hasn’t been.
Investing in recent years has been a rigged game. Normal investors have been locked out of the best deals.
Meanwhile, the venture capitalists and private equity sharks have feasted up on massive gains by keeping the best tech companies private for a decade at a time – sometimes longer.
My goal for the last five-plus years has been to change that.
I’ve been on a mission to find a way to bring the best early stage investments to my readers… companies with the potential to bring investors life-changing gains.
And that’s where “Penny IPOs” come in.
This is a small subsector of the tech market where companies still go public early – and all while they are still tiny. That means this is the one area in the market where everyday investors can still reap big gains on publicly traded stocks.
In fact, I’ve seen these stocks jump hundreds – and on occasion, thousands – of percent in a single day.
But hardly any investors know they exist.
What’s even more exciting – this tiny subsector is coming up on a very special time that I call the “4X Window.” That’s when we’ll see these explosive stocks go into hyperdrive.
We are positioning ourselves to take advantage of this opportunity right now.
So for anyone interested but unable to attend my presentation last night, I have asked my publisher to make it available to readers of The Bleeding Edge for another week at no cost. Just go right here for the replay.
And thank you again for taking the time to read and enjoy The Bleeding Edge.
Let’s turn to today’s topics…
I made a series of big predictions at the end of last year in a segment we called the 2020 Prediction Series. One of my predictions was that we would see the first state-backed digital currency launch this year.
And now that prediction has come true.
While countries like China and Sweden have been actively testing their respective national digital currencies over the past year, it looks like another country might beat them to the punch.
The Bahamas just announced plans to launch its central bank digital currency (CBDC) next month. It’s going to be called the Sand Dollar. What a clever name.
The Sand Dollar will be valued 1-to-1 with the existing Bahamian dollar, which itself is pegged to the U.S. dollar. So the Sand Dollar will effectively be a U.S. dollar stablecoin.
More specifically, the Sand Dollar will be a digital representation of the Bahamian dollar, and it will have some of the functional properties of a cryptocurrency like Bitcoin. The big difference is that it won’t be an open system. It will be controlled by the country’s central bank.
To manage inflation, the Bahamas announced that it will remove an equivalent amount of physical currency from circulation as Sand Dollars enter the market. That way, the country won’t have a sharp increase in its money supply, driving consumer prices higher.
We can look at this as a sign of things to come. We may be surprised that the Bahamas will be among the first countries to launch a CBDC, but many others will follow suit.
The Bahamas’ advantage is that it is a small island nation with a relatively self-contained economy. Its population is just under 400,000 people, and it is not a key player in the global economy, which removes a lot of potential complexity.
That makes it easier to deploy this technology and achieve rapid adoption. Plus, this will eliminate the need to distribute physical currency across the country’s many islands.
We’ll follow the Bahamas’ CBDC launch closely next month. Assuming it goes well, we can expect one or two more countries to follow suit within the next 12 months. The advantages will be obvious once adopted.
Microsoft just bought top gaming publisher Bethesda Softworks for $7.5 billion through the acquisition of its parent company ZeniMax Media.
This is a big move. Bethesda Softworks is one of the biggest names in the world of gaming.
It has produced hit game franchises like The Elder Scrolls, Fallout, and Quake. Collectively, these three franchises have sold over 95 million copies across multiple consoles, personal computers, and handheld gaming devices.
So there’s no question Bethesda is a top producer in the space. But why is Microsoft spending billions on a gaming company?
The answer is simple.
Microsoft is trying to stack the deck in the coming battle for market share between its new Xbox Series X and Sony’s PlayStation 5. These are the next-generation gaming consoles set to launch this holiday season.
Third-party game developers typically launch their games on both the Xbox and the PlayStation to maximize their sales. That’s why Bethesda’s top games have been available on both consoles up to this point.
Naturally, Microsoft wants to change that. It wants these hit games to be exclusive to Xbox. That could be a big competitive advantage.
And this is part of a bigger play in the transition to subscription-based gaming.
Historically, the gaming business has been about unit sales. But the top players in the industry are learning that they can make a lot more money by selling monthly subscriptions. Having customers pay $30 every single month is far better than periodically selling them a $60 game.
In the push for more subscription models, each console will offer a library of games to subscribers. Microsoft is hoping that restricting Bethesda’s titles to its Xbox Series X will make it the next-generation console that consumers flock to.
What’s more, the social aspect of these games will be restricted to monthly subscribers only. So gamers can still buy games separately, but they won’t be able to play with their friends unless they sign up for the monthly service. That will make the subscription incredibly sticky.
So it’s easy to see why Microsoft would shell out $7.5 billion for this acquisition. It could pay off in a big way for the stodgy incumbent.
This battle has been seven years in the making.
The last generation of gaming consoles, the Xbox One X and the PlayStation 4, were both launched in November 2013. It has been an unusually long wait for the next generation to be released, which is why this year is such an exciting one for the industry.
We will wrap up today with an incredible success story that nobody else is talking about.
Early stage financial technology (fintech) company Chime just raised $485 million in a Series F venture capital (VC) round. The company is now valued at $14.5 billion.
That makes Chime the most valuable fintech company in the world. That’s even more valuable than Robinhood. And I bet most of us have never heard of this company.
Chime is an online bank. It has no physical branches.
In fact, it’s just a smartphone app. Customers can sign up for an account on their phone in less than two minutes. And the user interface is fantastic.
This completely turns the table on the traditional banking industry.
Most banks make their money from investing customer funds, making loans, and charging late fees.
Chime’s business model is different.
It makes money by charging small transaction fees when consumers use its services. For example, Chime takes a portion of the transaction fee charged to merchants when customers use its debit card. In other words, Chime only gets paid if customers find its platform useful. I think this is a reasonable approach.
And Chime is a great case study for how the COVID-19 pandemic has disproportionately benefited certain companies that were well-positioned for change before the pandemic.
If we go back to March, Chime was only valued at $6 billion. It has more than doubled in value in just six months.
And if we look back to March 2019, Chime was only valued at $1.3 billion. That means its valuation has jumped 11X in 18 months. Incredible!
Chime is adding hundreds of thousands of new bank accounts each month. And the numbers show that its business model works. Chime is already profitable.
When we see this type of growth due to a change of behavior in the market, we can be sure the trend will persist. Chime is set to become a major player in the banking industry, largely thanks to trends strengthened by COVID-19.
And Chime’s CEO just came out and said that it is gearing up for an IPO next year. We absolutely need to track this company on our early stage watchlist.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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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.
