Bakkt, the much-anticipated institutional trading platform developed by Intercontinental Exchange (ICE), has reached a $740 million post-money valuation after having raised $180 million in funding last year. This comes via anonymous sources that spoke to crypto industry news site The Block, which published a report yesterday.
Last month, Cryptos reported that ICE CEO Jeff Sprecher said he expects Bakkt to launch later this year, noting the company had “invest[ed] over $1 billion in strategic initiatives including fixed income, mortgages and along with our partners the launch of Bakkt.” Still, Bakkt has not yet to launch any investment products, and is currently in discussions with regulators.
To achieve its stunning valuation, Bakkt has sold equity stakes to high profile external investors like Pantera, Microsoft, and Galaxy. Starbucks is also an equity holder, and an exciting potential partner, but they did not contribute any capital.
But as The Block report notes, it will be difficult for Bakkt to produce returns that would justify its Series A valuation, given it has delayed its launch by five months, and still faces a number of regulatory hurdles. Bakkt has proposed a fee of $0.50 per contract, which is fairly small, considering some are equating it to less than one basis point, and the next cheapest U.S. trading option currently sits at eight basis points.
Said one source on Bakkt’s near term earning potential:
“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.”
Their strategy post-launch, said the source, will need to be nearly flawless in order to cover its spending — notably, its recruitment and its recent first acquisition of assets from a commodities broker.
“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 concluded.
Whether Bakkt can deliver on its potential remains to be seen, but it seems they will have to execute sooner rather than later in order to keep investors happy.