Digital asset firm Bakkt, a subsidiary of Intercontinental Exchange (ICE), is currently exploring various strategic options, one of which includes a potential sale or breakup. This decision comes as the company faces challenges in its financial performance, despite showing significant revenue growth in recent years.
In an effort to assess its options, Bakkt has enlisted the help of a financial advisor. While no final decision has been made yet, speculation suggests that the company may also choose to remain independent. This news follows a recent report by Bloomberg, citing sources familiar with the matter.
Bakkt reported an impressive increase in total revenue for the year 2023, reaching $780 million. This growth can be largely attributed to the successful acquisition and integration of Bakkt Crypto (formerly known as Apex Crypto) in April 2023. However, despite the positive revenue figures, the company also reported a net loss of $226 million for the same period.
The rise in operating expenses to over $1 billion is primarily due to increased costs associated with crypto transactions, including clearing and brokerage fees linked to the acquisition. Bakkt's financial performance has been impacted by these rising expenses, resulting in a net loss for the year.
Despite encountering challenges in its financial journey, Bakkt remains optimistic about its future prospects. The company anticipates a significant revenue increase in 2024, potentially reaching up to $5.1 billion. This forecast represents a remarkable 555% growth year-over-year. However, Bakkt also expects its crypto-related costs to align with the revenue increase, with projections ranging between $3.2 billion and $5.02 billion.
One of the factors contributing to Bakkt's financial struggles is a decrease in notional traded volume by 49%, influenced by lower industry-wide volumes and reduced activity on partner app Webull Pay. Despite these challenges, the company remains focused on achieving its revenue targets for the upcoming year.
Bakkt's history traces back to its founding by the parent company of the New York Stock Exchange in 2018 with high expectations of being a game-changer for Bitcoin. However, despite the initial enthusiasm surrounding the company, Bakkt has faced difficulties in maintaining profitability since becoming a publicly listed entity in October 2021.
In response to market demands, Bakkt shifted its focus from a digital wallet initiative in 2021 to prioritizing cryptocurrency custody and trading services in 2022. This strategic shift aimed to capitalize on the growing demand for crypto-related services while adapting to evolving market trends.
Nevertheless, Bakkt decided to discontinue support for 25 out of the 36 crypto tokens listed on its acquired trading platform, Apex Crypto, in 2023. The reasoning behind this decision was not explicitly stated at the time, but it is believed to align with the company's strategy of focusing on a smaller number of more popular tokens. Additionally, recent regulatory changes in the crypto industry may have influenced this decision.
Looking ahead, Bakkt faces the challenge of balancing its revenue growth targets with managing its operational costs effectively. The company's exploration of strategic options, including a potential sale or breakup, reflects its commitment to navigating the evolving landscape of the digital asset market. As Bakkt continues to assess its next steps, stakeholders and industry observers will be closely watching to see how the company adapts to the changing dynamics of the crypto sector.
