Bakkt has been at the center of attention for continuously delaying the launch of its exchange. However, from the recent development, it is being speculated that Bakkt has raised almost $700 million in capitals through a Series A funding.
Bakkt has initially raised capital of $182.5 million last year for its promise to open a crypto trading exchange backed by various institutions. Now in the latest seed of Series A investment, it has raised approximately $740 million post-money valuations, which means the firm might have sold 25% of its shares to external investors like Galaxy, Pantera, Microsoft, and Starbucks.
What is Post-money Valuation
Post-money valuation represents the total value of the firm after all the external financial and capital injections are added to the company’s balance sheet. In the case of Bakkt, it also includes the equity given to Starbucks for the partnership between the two companies.
So, the obvious question here is how do the investors plan to cash out their investment after the post-money valuation of Bakkt comes at around $740 million, not forgetting the numerous regulatory barriers and also the 5-month-long launch delay of the exchange.
Things become more complicated when we consider Bakkt’s proposed fee of $0.50 per contract is quite small where some people also equated it to be less than 1 basis points. The next cheap trading option in the United States is 8 basis points. Many believe that Bakkt needs a perfect-execution of plan post the launch of the exchange as the expenditure has already been high particularly in terms of recruitment and its acquisition.
One of the sources close to the firm said,
“From a cash-flow perspective, Bakkt will not be earning much based on their proposed contract fees, so they really need a lot of volumes. A lot of things will need to line up for investors to receive returns that they would typically expect for a Series A.”
What is the Future of Bakkt
With a series of delays in the launch of the Bakkt exchange, if Bakkt fails to garner institutional investors along with other sources of capital to maintain the cash flow, investors can save themselves with the help of equity redemption rights provided by ICE. The ICE page 60 note says,
“non-ICE partners in Bakkt hold a put option to require us to repurchase their interests subject to certain terms. Delays in execution may allow investors to realize this exit and trigger their put.
However, Bakkt declined to comment on any such speculations of investors looking to bail out. One investor said,
“If I was looking to buy a piece in the emergent regulated US digital assets derivatives game today, I would look at cheaper alternatives which are further ahead in execution, they’ve paid too much.”
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