Discussion
Forbes – What is Equity Crowdfunding?
“Equity crowdfunding Is raising capital from the crowd online. Anyone can invest in your offering under equity crowdfunding. You can think of it as similar in function to a Kickstarter or Indiegogo campaign, in which potential investors visit a funding portal website and can explore different equity crowdfunding investment opportunities.”
Equity crowdfunding is by no means new but is growing in popularity. NowRx, an e-pharmacy, recently raised $20mil, the largest round ever on SeedInvest, one of the largest equity crowdfunding platforms. Equity crowdfunding allows common investors to buy securities in public companies including; equity, debt, revenue share, convertible notes, and more. Requirements differ depending on platforms (Top 10 Equity Crowdfunding Sites for Investors & Entrepreneurs) and range from age, investment size, raise amounts, accreditation, liquidity amounts, and more.
Equity crowdfunding has many benefits for both investors and entrepreneurs. Investors have increased access to companies that were once inaccessible while also adding liquidity by creating a marketplace where shares can be exchanged. Equity crowdfunding also allows entrepreneurs to set the terms of their raise allowing for total control of the process. Companies decide their own valuation, how much capital to raise, and have increased flexibility around their raise amount.
There are approximately 50% less publicly traded companies than there were in 2000. Investing in private companies has been extremely lucrative over the last decade, generating market-beating returns. However, those returns have only been available to wealthy, accredited, and connected investors. At Meera, we believe greater access to investments in private companies will not only create wealth-generating opportunities but it will also help grow a stakeholder’s mentality. Equity Crowdfunding seems to be a very useful tool to do just that.
Portfolio
Portfolio Overview
As we outlined in our previous newsletter, we remain bullish, for now. At this point, we are mainly in weekly options because this market is very fragile. When the market broke in its consolidation last week, we have seen low volume where the RSI is barely touching a bullish reading. With that being said, we are still at near post-COVID highs. $SPY’s previous all-time high was just over $323, and we closed on Friday at $321. Over the last 4 weeks, we have gone sideways, and we outlined that if we broke this consolidated resistance, we would see a re-test of these highs, which we are currently seeing. With cases rising, and earnings releasing over the next few weeks it, both could get ugly. The Tech sector has been hit especially hard, which had been the primary driver of this market. Tech has largely been the market’s crutch since COVID hit, and if that crutch is pulled then we may see some pain ahead.
Speaking of tech, we lost our shirts on our $FTNT and $NET calls. We got greedy with $NET and did not sell when we were up over 100% and had to sell it for a -77% loss. Something similar happened with $FTNT, we bought going into all-time highs trying to ride the wave, but then small mega-growth tech run into a wall.
On the other hand, we did get into the big banks. With their current valuations and our indicators seeing some room to run, we are holding $JPM and $MS after wall street embraced their earnings report last week.
Weekly Trade
This $MS chart play looks like our big winner last week. $MS went on a wild run for a few weeks in May, gaining 45% in a matter of 15 trading days. After that big run, it flatlined and the MACD and RSI retreated. The MACD started to print red, but the RSI turned to neutral all while the 20-day exponential moving average was being used as support.
Then, on July 13th we saw a large gap up breaking the price consolidation it was haunted by for nearly a month. This is when we entered our trade. While we bought at the open and overpaid compared to the intra-day lows, we still bought at this time of strength. We saw the MACD turning bullish and the RSI jump back above >60 which indicates the buying has picked up.
While this was a risky play as they reported earnings a few days after we bought, it has paid out so far. We are flat with this position, but the technicals described below shows another price increase. It has finally broken out of its post-COVID high which was also a long-term resistance level for $MS. This option expires this upcoming Friday, so we will look to flip this early in the week if we see a >1% swing to give us a >20%+ return.
Watchlist 07.20.2020
Private Company Spotlight
Many famous investors and entrepreneurs when asked “what kind of business to start” will reply with something along the lines of – find a pain point or inefficiency in your life and solve it. That is exactly what NowRx has done. NowRx is a full-service on-demand prescription delivery pharmacy. The company is disrupting the e-pharmacy space by offering accelerated convenience at normal pharmacy prices.
NowRx recently raised a series A of $20million dollars through the equity crowdfunding platform SeedInvest. The company, now valued at $85million, is planning on using the funds to expand its footprint and improve pharmacy technology. The e-pharmacy market is set to be worth $107.53billion by 2025 according to Zion Market Research. NowRx currently makes money by buying pills in bulk and selling them at retail. They have a 5,000 sq ft automated facility that fills prescriptions which are then delivered by their fleet. Their QuickFill platform is built on optimization and efficiency combining logistics algorithms and automation technology in order to scale/keep costs down. NowRx puts a focus on the customer offering; text, calls, & video chats with a pharmacist, seamless connection with insurers, coupons, automatic refills, and same-day delivery if ordered by a certain time. As a result, NowRx’s customer base grew 84% and revenues increased 78% over the last year.
The e-pharmacy and prescription delivery industries are not void of competition. Amazon’s Pillpack, Nurx, Capsule, Walgreens, and CVS all offer some sort of prescription delivery and optimization (Walgreens and CVS use Postmates). Even though e-pharmacy space may seem crowded, we see a lot of similarities to the food delivery and cloud kitchen industries. We believe NowRx may be one of the first companies to use a cloud kitchen model in the pharmacy space potentially unlocking tremendous growth potential. Cloud kitchens are centralized licensed commercial food production facilities where food is prepared and optimized for delivery. Their benefits include lower overhead, better efficiency, real-time data adaptability, and more. Sound familiar?
We believe successful companies in this space will focus on;
Regulation- Currently NowRx only operates in California. It is imperative that the company maneuver legal barriers required to sell medications across state lines.
Logistics Algorithms- Uber still seems like a great idea but has yet to reach profitability, in order to be successful in this business delivery can not subtract from your bottom line
Connecting with physicians- When was the last time you went to the doctor and they didn’t default to Walgreens, CVS, or your local brick and mortar pharmacy?
Learn Something
Investopedia Newsletter Signup: Term of the Day
“Learn a new financial term every day and read related articles so that you’re educated, informed, and ready to make smarter financial decisions”
This is a great and simple newsletter that sends you one financial term and definition to your inbox every day. We think it is a great way to learn and expand your knowledge base for investors of every skillset. New investors will get exposure to new topics and ideas while more experienced investors can brush up on the basics and review concepts.