Difficulties Mount As Bakkt Deals With Cash Shortage

The crypto firm Bakkt, supported by the Intercontinental Exchange (ICE) and introduced with much excitement in 2019, has issued a warning about its financial stability for the next 12 months. In a recent filing with the US Securities and Exchange Commission on February 7th, Bakkt amended its quarterly report, highlighting a section on risk factors indicating a potential inability to sustain operations.

Encountering Difficulties

Established in 2018 amid significant anticipation by Intercontinental Exchange, owner of the NYSE, Bakkt was initially perceived as a gateway for institutional investors to enter the Bitcoin market during a downturn.

A Bitcoin investor with a substantial following questioned how Bakkt encountered difficulties amidst the rise in crypto markets. However, Bakkt now expresses doubt regarding its cash reserves and their adequacy to support operations in the upcoming year. The company cites uncertainties related to its expansion into new markets and the evolving landscape of crypto assets, acknowledging its inability to generate sustainable operating profits and adequate cash flows. Its future prospects hinge on the ability to raise capital.

Looking Ahead

Bakkt discloses intentions to potentially raise funds by issuing registered securities in public markets to fulfill its long-term objectives. A newly filed amended Form S-3, once effective, will authorize the firm to issue up to $150 million in registered securities to secure additional capital. Regarding the utilization of proceeds through the sale, Bakkt maintains broad discretion, specifying a focus on working capital and general corporate purposes.

As a digital asset platform and payments app facilitating institutional transactions with crypto assets, Bakkt has also formed strategic partnerships with entities such as Starbucks and AWS. Despite going public in 2021 with a surge in share prices, reaching over $40, Bakkt saw its stock experience a 7.6% decline in after-hours trading when it plummeted to $1.34. This marks a 37% decrease since the beginning of the year.