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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
Teuta Franjkovic
Last Updated February 8, 2024 10:03 AM

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.

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.”

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.

Bakkt deleted message on X
Credit: X

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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