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Bakkt To Go Bankrupt? Digital Asset Platform Tells Sec It Might Run Out Of Money

Last Updated February 8, 2024 10:03 AM

Bakkt warned it may not have enough money for its clients this year, seeking additional assets. | Credit: Veronica Cessari, CCN

Key Takeaways

Launched in 2019, Bakkt indicated it might not survive next year due to financial struggles.
The crypto company suggests current funds will last months, citing an uncertain market environment and lack of profits.
Bakkt is raising $150 million through public offerings to support operations and long-term goals.

Cryptocurrency enterprise Bakkt, initiated in 2019 with support from the Intercontinental Exchange (ICE), has recently signaled a concerning financial outlook.

On February 7, in an updated filing to its quarterly report with the Securities and Exchange Commission (SEC), Bakkt included a cautionary note in the risk factors section.

Bakkt Warns of Potential Insolvency Within a Year

Bakkt revealed that it might “not be able to continue as a going concern,” indicating potential challenges in sustaining operations over the next twelve months.

Established by the Intercontinental Exchange, owner of prominent derivatives exchanges and the New York Stock Exchange (NYSE), Bakkt initially aimed to facilitate Starbucks customers in purchasing coffee with Bitcoin (BTC). Its first CEO was future U.S. Senator Kelly Loeffler.

The company launched a digital wallet in 2021, though it was discontinued last year. Currently, Bakkt is concentrating on providing crypto custody and trading services.

Despite these efforts, the broader initiative to utilize Bitcoin, both as an asset and a blockchain, for payment solutions has largely not taken off. However, the Lightning Network, a secondary layer blockchain designed for more efficient processing of Bitcoin transactions, continues to work towards making this vision a reality.

Bitcoin investor “juthica” queried her 16,000 followers on X (formerly Twitter) regarding how Bakkt could falter despite the substantial growth in cryptocurrency 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 (@juthica) February 7, 2024

More Cash Needed to Avoid Shutting Down

Bakkt has recently stated that it now doubts its available cash and restricted cash will be adequate to support its operations for the coming 12 months.

The company said :

“There is significant uncertainty associated with our expansion to new markets and the growth of our revenue base given the rapidly evolving environment associated with crypto assets.”

Remember Bakkt?

“We have determined that we do not believe that our cash and restricted cash are sufficient to fund our operations for the next 12 months”

“If we cannot continue as a viable entity, our stockholders would likely lose most or all of their investment in us.”

— db (@neuralinkdb) February 7, 2024

Bakkt also highlighted its struggles in achieving sustainable operating profits and generating sufficient cash flows. The company noted that its future success hinges on its ability to secure additional capital.

According to Bakkt:

“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.”

Eyeing Public Markets for Capital Raise to Support Long-Term Goals

Bakkt is exploring the possibility of raising additional funds by issuing its registered securities in the public markets, aiming to support its long-term objectives.

In a now-deleted post on X, the company has confirmed it had filed an amended Form S-3, which, upon becoming effective, would enable Bakkt to issue up to $150 million in registered securities to gather the needed capital.

Although Bakkt did not detail specific uses for the proceeds from the securities sale, the firm mentioned it would maintain wide discretion over the net proceeds’ application.

The anticipated use of these funds includes bolstering working capital and other general corporate endeavors, reflecting Bakkt’s strategic approach to securing its financial future and advancing its corporate goals.

Bakkt’s stock witnessed a 7.6% decline in after-hours trading on Wednesday, dropping to $1.34. This represents a 37% decrease since the start of the year, underscoring the volatility and challenges faced in the digital asset market.

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About the Author

Teuta Franjkovic

Teuta is a seasoned writer and editor with more than 15 years of experience. She has expertise in covering macroeconomics and technology as well as the cryptocurrency and blockchain industries. She has worked for several publications as a journalist and editor, including Forbes, Bloomberg, CoinTelegraph, Coin Rivet, CoinSpeaker, VRWorld and Arcane Bear. Teuta began her professional career in 2005, working as a lifestyle writer at Cosmopolitan in Croatia. From there, she branched out to several other publications, covering mainly business and the economy. She then turned her attention to the world of cryptocurrency and blockchain, believing that crypto is among the most important inventions in the history of humanity. Her involvement in fintech began in 2014 and she has since lent her expertise in writing, editing and gathering information about the world of crypto, blockchain, NFTs and Web3. An all-round news hound, mentor, editor, and writer, Teuta enjoys teamwork and good communication. She holds a WSET2 diploma and has a thing for chablis, punkrock music and shoes. She also holds a double MA in Political science and Entrepreneurship.

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