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Bakkt $2.1bn deal highlights appeal of SPACs for crypto and fintech firms

(ATF) Cryptocurrency exchange Bakkt is going public via a merger with a special purpose acquisition company (SPAC) at a valuation of $2.1 billion. The deal could give Bakkt a head start in the race to raise funds to exploit the recent explosion in the value and volatility of bitcoin.

Bakkt was launched in 2018 by Intercontinental Exchange (ICE) and on Monday January 11 the company announced its deal to go public via a SPAC merger – and the appointment of former head of technology at Citigroup’s consumer bank Gavin Michael as new chief executive officer.

The merger with VPC Impact Acquisition Holdings gives the combined company an enterprise value of approximately $2.1 billion and is expected to result in over $500 million of cash on the balance sheet, from up to $207 million of cash held in VPC Impact Acquisition Holdings’ trust account and a $325 million concurrent private placement (PIPE) of Class A common stock of the combined company, at $10.00 per share, including a $50 million contribution from ICE.

The company – renamed Bakkt Holdings – will be listed on the New York Stock Exchange, which is owned by ICE.

The explosion in the value of bitcoin in recent months has accelerated a drive to bring cryptocurrency businesses to the capital markets. Coinbase, the biggest US crypto exchange, has announced plans to launch a traditional IPO in 2021, with Goldman reported to be mandated to explore a deal.

Coinbase: traditional approach

Bakkt’s SPAC deal is expected to close in the second quarter, which may allow it to go public before Coinbase can float via the traditional approach of issuing a prospectus, conducting a roadshow and selling shares to investors.

Bitcoin’s most recent rise has been accompanied by high volatility – including a more than 20% plunge since the weekend that took its price from a recent high of over $42,000 to as low as $30,500 on Monday.

But the widening investor base for cryptocurrencies and growing involvement by traditional financial services firms seems likely to guarantee further deals to raise capital, with SPACs offering a quick route to a public listing.

Bakkt’s attempt to differentiate its business model will be based on adoption of a new app that is intended to launch in March with a target of around 30 million customers in the next five years.

Bakkt aims to “enable incremental consumer spending, reduce traditional payment costs and bolster loyalty programs, adding value for all key stakeholders within the payments and digital assets ecosystem”, it said in a statement.

Bakkt said that over 400,000 customers have pre-registered for the app, which would allow them to manage digital assets including bitcoin along with loyalty and reward points, and even assets from video games.

Bakkt currently supports more than 30 loyalty program sponsors and over 200 gift card merchants, and Starbucks has integrated Bakkt Cash as a payment method for customers.

PJ Solomon is financial advisor to Bakkt on the deal, while Jefferies and Citigroup are serving as financial and capital markets advisors to Chicago-based VPC Impact Acquisition Holdings and co-placement agents on the PIPE.


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Jon Macaskill

Jon Macaskill has over 25 years experience covering financial markets from New York and London. He won the State Street press award for 'Best Editorial Comment' in 2016


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