Two of the hottest trends in finance—Bitcoin and SPACs—are coming together.
Bakkt, founded in 2018, initially made waves by launching a Bitcoin futures product. But the company appears most focused now on a digital app that allows people to trade and spend various kinds of digital assets—from cryptocurrencies to loyalty points from businesses like
to videogame rewards.
Bakkt will go public through a special purpose acquisition company, or SPAC, which involves a shell company raising money to buy another company and take it public. Bakkt will merge with
VPC Impact Acquisition Holdings
(VIH), which is sponsored by the Chicago investment firm Victory Park Capital. VPC Impact went public in September.
The deal gives Bakkt an enterprise value of $2.1 billion. So far, more than 400,000 people have signed up for Bakkt’s app, which is still invite-only, the company said. It is set for a wider launch in March.
Intercontinental Exchange will own a majority stake in the new company, with current VPC Impact shareholders owning 8% and Victory Park Capital owning 2%.
The merged company will have more than $500 million in cash on its balance sheet. Gavin Michael will be its new CEO. Michael served most recently as head of technology for Citigroup’s (C) global consumer bank. Bakkt’s first CEO was Sen. Kelly Loeffler, who left after she was appointed to a U.S. Senate seat representing Georgia. She just lost her race for a new term.
Bakkt’s success will depend on whether people want to use its platform to hold or trade their digital assets. Bakkt can coexist with other major crypto players like Coinbase, which is also set to go public soon.
But Bakkt will need to show that enough users will want to save and spend digital assets on its platform, and it will have to work with merchants. So far, many merchants have been wary of using cryptocurrencies, because their prices are volatile and it can be difficult to hold digital currencies in the same financial accounts as cash balances.
The use of a SPAC makes sense to Dan Weiskopf, a portfolio manager for the
Amplify Transformational Data Sharing
exchange-traded fund (BLOK), which invests in publicly traded companies focused on blockchain technology.
“Using a SPAC for Bakkt to come public makes sense to me because it is a streamlined process where controlling decision makers can make a deal happen quicker,” Weiskopf wrote in an email to Barron’s. “How it does in the open market is a different question, but we think it is an important part of how the marketplace for pure-play public companies is developing.”
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