Bakkt to go public
Bakkt offers cash-settled futures on Bitcoin competing against the rival futures contracts at the CME and the CFD contracts offered by London’s margin trading community
The ICE exchange’s cryptocurrency business Bakkt is to go public, however, it will not do so through a traditional IPO. Instead, it will reverse into a blank cheque company or SPAC, despite ICE being the owner of the New York Stock Exchange which hosted many of 2020s most successful IPOs.
Bakkt will seek to merge with VPC Impact Acquisition Holdings, that trades under the ticker VIH. The SPAC originators Victory Park Capital are a Chicago based alternative investment manager who listed the acquisition vehicle back in September, through an IPO which raised $200 million in the process.
Rumours that a deal was in the offing saw the VPC Impact Acquisition share price rise by more than 50% over the last week to trade as high as $17.0 compared to its IPO price of just $10.00 a share.
Assuming the deal is completed it’s likely to value Bakkt at around $2.10 billion, and will raise an additional $532.0 mullion of fresh cash. $50.0 million of which will come from the ICE exchange itself. The merged entity will be listed on the NYSE.
Bakkt has also acquired a new Chief Executive in the shape of Gavin Michael former head of technology at Citi’s global consumer banking division.
Much like its parent company Bakkt is something of a hybrid business and is probably best known as a cryptocurrency derivatives exchange. That offers deliverable futures and options on Bitcoin. Alongside custody facilities, both on and offline, as well as secure e-wallets for participants to place their coins in.
Bakkt also offers cash-settled futures contracts on Bitcoin, competing against the rival futures contracts at the CME and the CFD contracts offered by London’s margin trading community.
However, Bakkt also facilitates brand customer loyalty schemes that use digital assets and it has created a marketplace that allows consumers who are collecting those points to trade or spend those rewards electronically as if they were a form of cash.
In announcing that it will list via a SPAC Bakkt is likely to trump Coinbase to become the first major listed cryptocurrency business. A move that will bring cryptocurrencies further into the mainstream, despite unprecedented warnings this week from the UK’s FCA.
The warnings suggested that investors in cryptocurrencies should be prepared to lose all of the money they have invested in instruments that the FCA considers to be a “high risk and volatile investment strategy”. The FCA further cautioned that cryptocurrencies were difficult to understand and to convert back into cash.
Veteran US fund manager Bill Miller recently took a different view in his quarterly letter to clients. In which he flagged that Bitcoin had been not only the best-performing asset class in 2020 but that it had outperformed all other major assets over 3, 5 and 10 year time frames as well.
Mr Miller sees Bitcoin as being very much a supply and demand story. He suggested that the new supply of Bitcoins is around 900 per day and that PayPal and Square are thought to be buying many, if not all of those new coins on behalf of their customers. Meaning any additional demand or investment into Bitcoin will just drive the price higher once more.