ICE-backed Crypto Company Bakkt Facing Solvency Issues, Looking to Raise Capital

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  • Bakkt, a prominent crypto company backed by the ICE, has recently issued a warning indicating potential financial difficulties.
  • The company cited challenges associated with expanding into new markets and growing its revenue base within the volatile crypto asset environment.
  • To address concerns, Bakkt is considering a capital raise by issuing registered securities in public markets

Bakkt, a prominent crypto company backed by the Intercontinental Exchange (ICE), has recently issued a warning indicating potential financial difficulties that could threaten its operations over the next year. The company, which initially garnered significant attention upon its launch in 2019, has expressed concerns about its cash reserves and the sustainability of its business model in a rapidly evolving crypto landscape.

In an amendment filed on February 7, 2024, to its quarterly report with the United States Securities and Exchange Commission (SEC), Bakkt included a section outlining various risk factors, notably highlighting the possibility that it may “not be able to continue as a going concern.” This statement has raised eyebrows within the crypto community and among investors, signaling potential challenges ahead for the company.

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A Rough 2024 for Bakkt Despite a Promising History

Founded in 2018 amid considerable anticipation, especially given its backing by Intercontinental Exchange, the parent company of the New York Stock Exchange, Bakkt was initially hailed for its role in facilitating institutional investment in Bitcoin during a challenging market period. However, recent developments have cast a shadow over its future prospects.

Known for its digital asset platform and payment app facilitating the buying, selling, storing, and spending of crypto assets, Bakkt has previously secured strategic partnerships with industry giants like Starbucks and Amazon Web Services.

Unfortunately, despite its promising start and a successful public listing in 2021, Bakkt’s stock has experienced a significant decline, dropping 7.6% in after-hours trading to $1.34, representing a 37% decrease since the beginning of 2024.

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Doubts Among Investors and Enthusiasts

Bitcoin investor “juthica,” followed by thousands, took to social media to express bewilderment at Bakkt’s predicament, questioning how the company could falter amidst a period of substantial growth in crypto markets.

“How did ICE and Bakkt so terribly bungle things in a world where price has 10x’d and tradfi institutions have dominated over startups in the US,” juthica said in a post on X (formerly Twitter).

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Bakkt, on its part, has acknowledged its financial uncertainties, stating that its current cash reserves may not be sufficient to sustain operations over the next 12 months. The company cited challenges associated with expanding into new markets and growing its revenue base within the volatile crypto asset environment.

“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,” Bakkt disclosed in its filing.

Plans to Mitigate Further Decline

To address concerns, Bakkt is considering a capital raise by issuing registered securities in public markets, with plans to raise up to $150 million. While the specific utilization of these funds remains unspecified, the company indicated intentions to allocate them towards working capital and general corporate purposes.

As Bakkt navigates these financial challenges, investors and industry observers will closely monitor its actions and strategies to maintain its position in the competitive crypto landscape.

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