Key Takeaways:
- Former Starbucks bitcoin banker Bakkt is now grappling with crypto business challenges and seeking capital.
- Bakkt suggests insufficient cash reserves to sustain business for the next 12 months.
Bakkt, a cryptocurrency enterprise launched in 2019 with backing from the Intercontinental Exchange (ICE), has recently raised concerns about its financial outlook.
In an updated filing to its quarterly report with the Securities and Exchange Commission (SEC), the company included a cautionary note in the risk factors section, expressing doubts about its financial stability for the next 12 months.
Bakkt cited its ambitious plans to expand into new markets and grow its revenue base within the rapidly evolving landscape of cryptocurrency assets as sources of uncertainty.
Originally founded in 2018 with a focus on enabling large corporations like Starbucks to accept crypto payments from customers, Bakkt later shifted its strategy to providing crypto trading and custody services to financial institutions and fintech companies.
This shift, described as a “business-to-business-to-consumer approach,” aimed to embed crypto solutions into client environments. Despite its initial success and growth, culminating in the introduction of a digital wallet in 2021, Bakkt has encountered challenges in its crypto business and is now seeking ways to raise capital.
Bakkt recently filed an amendment to its Form S-3 filing, allowing the firm to issue up to $150 million worth of securities to address its limited cash flow and fund its long-term vision.
The company’s warning, known as a “going concern” notice, acknowledges its uncertainty about having sufficient cash to fund operations for the next 12 months and its inability to substantially increase revenues beyond historical levels to generate sustainable profitability and cash flows without raising additional capital.
In response to these challenges, Bakkt is exploring the possibility of raising additional funds by issuing registered securities in the public markets.
While the firm did not specify the exact use of proceeds from the securities sale, it indicated that it would maintain discretion over their application to support its long-term objectives. This move reflects Bakkt’s proactive approach to addressing its financial concerns and ensuring its continued operation and growth in the dynamic cryptocurrency landscape.
