Bakkt Weighs Sale or Breakup Amid Crypto Market Shifts: Report

Bakkt Holdings Inc., a digital-asset marketplace launched by Intercontinental Exchange Inc. (ICE), the parent company of the New York Stock Exchange (NYSE), is considering several strategic options including a potential sale or breakup, Bloomberg reports. This exploration comes at a time when the crypto industry is experiencing heightened consolidation and strategic repositioning.

Bakkt, headquartered in Alpharetta, Georgia, has engaged a financial advisor to explore various pathways including remaining independent, a complete sale, or breaking up into smaller entities. This evaluation is driven by the need to adapt to the fluctuating market dynamics and intense competition within the digital asset sector. Despite the rumors and ongoing considerations, no final decision has been made public.

Founded in 2018, Bakkt entered the market with high expectations, partnering with prominent firms such as Starbucks and Microsoft. Initially positioned as a game-changer for Bitcoin, Bakkt’s journey has been marked by significant financial turbulence and strategic shifts.

The company went public in 2021 through a merger with a special purpose acquisition company (SPAC). Despite reporting a total revenue of $780 million for 2023, Bakkt incurred a substantial net loss of $226 million. This financial strain is partly attributed to the high operating costs associated with crypto transactions and the integration of Apex Crypto, which Bakkt acquired in April 2023.

Bakkt’s stock performance has been volatile, with shares falling significantly from a high of $59.57 at the beginning of 2024 to around $19 recently. Earlier this year, the NYSE issued a warning regarding potential delisting due to the stock trading below $1.00 per share for an extended period. In response to financial challenges, Bakkt sought and obtained regulatory approval to raise $150 million through a securities sale, which it successfully executed.

Despite these challenges, Bakkt remains optimistic about its future prospects. CEO Andy Main has projected potential revenues ranging from $3.2 billion to $5 billion for 2024, which could allow the company to break even. However, the firm has also forecasted that its operational costs will increase in line with revenue, anticipating expenses between $3.2 billion and $5.02 billion.

Bakkt’s strategic repositioning includes a partnership with Crossover Markets to develop a crypto-focused electronic communication network, BakktX. This initiative aims to enhance the firm’s trading capabilities and market reach. Additionally, Bakkt holds a BitLicense from the New York State Department of Financial Services, a coveted regulatory approval that positions it alongside major industry players like Coinbase, Circle, and Square.

The potential sale or breakup of Bakkt is happening amidst a wave of mergers and acquisitions in the crypto space. Notable transactions include Robinhood Markets Inc.’s acquisition of Bitstamp and Riot Platforms Inc.’s proposal to take over Bitfarms. This trend reflects a broader industry movement towards consolidation as firms seek to bolster their market positions and expand their service offerings.

Despite these industry trends, Bakkt faces significant operational and financial challenges. The company has reported nine consecutive quarters of net losses since its public listing. Additionally, it has had to streamline its operations, including cutting support for 25 of the 36 crypto tokens listed on the Apex Crypto platform, to focus on a more manageable number of popular tokens amidst a changing regulatory landscape.