Bakkt business faces uncertainty, seeks $150M in securities sale

Digital asset firm Bakkt, which is owned by Intercontinental Exchange (ICE), is facing cash shortage and other financial difficulties, signaling it might struggle to continue operations.

Amidst its financial woes, Bakkt plans to raise up to $150 million by selling securities to alleviate its ongoing cash flow problems.

The cryptocurrency platform was introduced by the owner of the New York Stock Exchange (NYSE) in 2018 to facilitate Bitcoin transactions for everyday purchases, such as buying coffee from Starbucks. Kelly Loeffler, who later served as a U.S. Senator, was appointed as Bakkt’s first CEO.

Despite its ambitious goals and the backing of a major financial institution, the platform has encountered challenges in realizing its vision. In 2021, Bakkt launched a digital wallet, which was subsequently discontinued in 2022, as the company shifted its focus towards crypto custody and trading services.

“We might not be able to continue as a going concern, We do not believe that our cash and restricted cash are sufficient to fund our operations for the 12 months following the date of” the filing reads.

The broader initiative to use Bitcoin for payments has largely fallen short of expectations, although projects like the Lightning Network seek to upgrade transaction efficiency through layer-2 blockchain solutions.

On February 7, Bakkt filed an amendment to its quarterly report with the U.S. Securities and Exchange Commission (SEC), explicitly stating concerns about its ability to continue as a going concern over the next year.

Bakkt’s inability to generate sustainable operating profits or adequate cash flows has led to this critical juncture. The company now looks towards raising additional capital through the issuance of registered securities in the public markets.

In an amended Form S-3 filing, Bakkt detailed the planned securities sale, which it hopes to provide the necessary funding for working capital and other corporate purposes. However, the company has been vague about the specific use of the proceeds from this sale, maintaining broad discretion over their allocation.

“We cannot conclude it is probable we will be able to increase revenues substantially beyond levels that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business without raising additional capital in the near future,” it added.

In 2023, Bakkt cut support for 25 out of the 36 crypto tokens that were listed on its recently acquired trading platform, Apex Crypto. At the time, Bakkt didn’t provide a reason for the delisting, but the company was seeking to focus on a smaller number of more popular tokens. It also can be attributed to recent regulations and changes in the crypto industry.

Bakkt also stated that the acquisition of Apex Crypto aligns with its strategic focus on the business-to-business (B2B) market for crypto services. As part of this focus, Bakkt shut down its own retail cryptocurrency exchange.