Bakkt Announces Merger With SPAC VPC In A Roughly $2 Billion Deal

January 13, 2021 05:33 PM
Bakkt was publicly revealed in August 2018 by its parent company, Intercontinental Exchange
Bakkt plans to become a publicly traded company via a merger with SPAC VPC Impact Acquisition Holdings (NASDAQ: VIH)
As Bakkt apps begin coming to market, support from those major consumer brands has the potential to quickly push them mainstream
Crypto story of the day

Crypto story of the day

CRYPTO MOVERS AND PRICES

 

The Top 10 saw marginal changes this morning on either side of unchanged, with the exception of Polkadot (DOT), which is up 12%. Volumes across exchanges have come down from elevated levels seen at the beginning of the week.

Crypto Story of the Day

This week Bakkt announced they were merging with SPAC VPC in a roughly USD 2 billion deal. The firm has little revenue to speak of and has seen plenty of change in its short existence.

Bakkt was publicly revealed in August 2018 by its parent company, Intercontinental Exchange, the owner of the New York Stock Exchange. In the company’s first blog post, Bakkt said it “is expected to include federally regulated markets and warehousing along with merchant and consumer applications.” The blog post also described Bakkt as working with “companies that include BCG, Starbucks, Microsoft, to create an open ecosystem that supports growing needs” in the digital asset marketplace. 

Bakkt originally planned to launch its “1-day physically delivered Bitcoin contract along with physical warehousing” in November 2018. However, that contract would launch nearly a year later in September 2019, along with the launch of Bakkt Warehouse to custody BTC associated with their products. A month later, Bakkt launched USD-settled monthly futures and monthly options and later in the year, after initially only supporting trading clients, opened up its custody solutions to all institutions. 

Bakkt’s originally planned “merchant and consumer applications” which, according to the initial release, had the backing of notable firms, eventually took the form of the Bakkt App which was launched in an MVP mode in December 2020. The app was made available to users from a waitlist but hasn’t been released for broader use since. The app takes a wide view of the term “digital asset,” allowing “users to exchange loyalty points for cash, send friends everything from airline miles to bitcoin…” 

Bakkt was originally headed by CEO Kelly Loeffler, who stepped down in December 2019 after she was appointed to a US Senate seat representing Georgia. At that time, Mike Blandina, who previously worked at PayPal and Google, took over as CEO while former Coinbase VP Adam White came on as President. With the announcement of plans to go public, Gavin Michael, former Head of Technology of Citi’s Global Consumer Bank, joined Bakkt as CEO. Bakkt plans to become a publicly traded company via a merger with SPAC VPC Impact Acquisition Holdings (NASDAQ: VIH) sponsored by Victory Park Capital (VPC). 

According to SEC filings, VPC Impact Acquisition Holdings is a blank check company incorporated as a Cayman Islands “exempted company.” VPC describes itself as investing in “emerging and established businesses across various industries.” According to its website, VPC has invested roughly USD 6 billion “across more than 115 investments.” Since launching, Bakkt has raised a total of USD 482.5 million, with its most recent Series B round bringing in USD 300 million.

Bakkt seems to have been playing off its back foot since it was first announced. The firm’s launch in the spring/summer of 2018 was in the fading days of the crypto bull market and, given the valuations and capital that was raised at, the team seemed to be in a constant panic to justify its existence to its high-profile partners. 

As crypto entered a bear market, the firm took opportunities to press-release even the slightest internal change in an effort to maintain relevance without revenue. At the time, we were highly critical of the company’s decision to launch a physical, rather than cash-settled, future. It was our belief that institutional investors had little interest in holding physical and if they did, there were plenty of other spot market options, eliminating the value of such a product. Our view was justified in the launch, which was tepid and even now has yet to attract significant volume. 

The fast change of focus to the retail side of their vision reflected a “path of least resistance” toward having an actively-used product, but it now appears ill-timed given the emphasis on institutional involvement in the latest rally. Just over a year after the shift in focus, the company has plenty of sign-ups but no live product.

All that being said, the firm has an impressive list of partners committed enough to the project to show little dissent throughout a crypto bear market. As Bakkt apps begin coming to market, support from those major consumer brands has the potential to quickly push them mainstream. 

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