ICE’s Bakkt platform is yet to hit the crypto market streets yet its valuation stands currently at $740, reports The Block. As per the publication, this is the post-money valuation of the company.
It means the “company’s value after outside financing and/or capital injections are added to its balance sheet”. While collaborating with big industry players, ICE has reportedly sold 25% of Bakkt’s shares to external investors. This includes names like Pantera, Galaxy Digital, Starbucks, Microsoft and others.
Announced in August 2018, Bakkt is one of the most awaited projects of 2019. Also, the project is facing several delays due to regulatory concerns and the slowdown in the crypto industry.
Just before the ending of 2018, Bakkt managed to raise a whopping $182 million from twelve high-profile investors. The Bakkt platform aims to provide institutional access to the crypto market.
To bring the institutional players to the crypto industry, Bakkt plans to launch Bitcoin Futures contracts currently under review by the CFTC. Earlier this year in January 2019, Bakkt acquired some of the assets belonging to Rosenthal Collins Group (RCG).
Projected Returns to Bakkt’s Investors
As said, Bakkt is already facing delays in its launch due to several regulatory barriers. However, with its $740 million value, the interesting question is what shall be the projected returns of Bakkt’s investors.
Also, Bakkt is reportedly keeping its contract-fee very low to just $0.50 per contract. This could be just 1 basis point with the next cheapest trading option at 8 basis point. An unnamed source 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 volume.”
Also, the source notes that Bakkt has to very precise and flawless in its execution post-launch. “A lot of things will need to line up for investors to receive returns that they would typically expect for a Series A,” the source said.
What If Bakkt Fails to Deliver?
It is important to think what about the huge investments at all if Bakkt’s plans fall on face. What if the platform fails to generate enough cash-flow sources or institutional adoption?
An SEC Filing highlights the investor “get-out” clause. The filing notes “non-ICE partners in Bakkt hold a put option to require us to repurchase their interests subject to certain terms.” Furthermore, delays in execution will allow investors to manage their exit.
One of the industry sources says that Bakkt plans to raise its pre-money valuation to $1 billion during its next fundraising round. It remains to be seen how things turn around going further.
The arrival of Bakkt has kept investors hopeful for the growth of the crypto market.