Bakkt Holdings, a cryptocurrency platform majority owned by Intercontinental Exchange, has announced plans to go public by combining with a blank-cheque company, bringing together two of the frothiest elements of US markets.
New York Stock Exchange parent ICE on Monday said Bakkt had agreed to combine with a special purpose acquisition company sponsored by Chicago-based investment group Victory Park Capital.
Bakkt, formed by ICE in 2018, was led by Kelly Loeffler from August 2018 until December 2019, when she resigned as chief executive and was named a US senator from Georgia, replacing Johnny Isakson, who retired. Ms Loeffler, who is married to ICE founder and chief executive Jeffrey Sprecher, lost her seat to Democrat Raphael Warnock in a run-off election last week.
Bakkt is planning to launch an app in March that will let users buy and sell cryptocurrencies and manage other digital assets such as loyalty points and gift cards. Its ambition is to reach more than 30m customers by 2025, from none last year, it says in its regulatory filing. The app, currently accessible only by invitation, had garnered interest from about 400,000 people seeking early access, Bakkt said.
When listed on the NYSE, it would have an enterprise value of $2.1bn, ICE said.
Monday’s deal highlights how a rising number of mainstream companies and investors are dabbling in the cryptocurrency sector. Bakkt’s plans for a public market debut come about a month after Coinbase, a well-known digital currency exchange, announced its intention to float its shares in an initial public offering.
The announcement also demonstrates how Spacs offer a smoother route to public markets for companies with new technologies and earlier stage businesses. Last year, Spacs made up almost $76bn of the $159bn raised by IPOs in the US, outpacing traditional listings since August.
Last month, veteran investor Jeremy Grantham described the Spacs craze as “reprehensible”, despite himself making some $200m out of an early bet on battery maker QuantumScape after it went public through a Spac vehicle.
The rising focus on digital assets comes as bitcoin, the most actively traded digital token, has surged in value in recent months. Volatility remains high, however, highlighting the asset’s immaturity. Bitcoin prices dropped roughly a fifth at the start of this week as a top UK financial regulator renewed its warning that consumers investing in cryptocurrencies should “be prepared to lose all their money”.
Bakkt also offers a cryptocurrency storage service and bitcoin derivatives contracts. ICE’s revenues related to Bakkt are expected to be roughly $9m for the fourth quarter of 2020, with operating expenses of about $39m. It will have some $500m in cash on its balance sheet, reflecting $207m held by the Spac’s trust account and a $325m private placement of shares in the combined entity, including a $50m contribution from ICE.
Gavin Michael, the former head of technology for Citigroup’s global consumer bank, would take the reins as chief executive of the combined company, Bakkt said on Monday. “The average consumer holds a wealth of digital assets but rarely tracks their value and lacks the tools to manage and utilise them,” Mr Michael said.
David Clifton, Bakkt’s interim chief executive, will join the combined company’s board after the deal closes.
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