Bakkt, the cryptocurrency platform backed by the Intercontinental Exchange (ICE), has warned it may not have enough funds to stay in business over the next 12 months.
Bakkt made the revelation in a filing with the United States Securities and Exchange Commission, stating that its financial condition resulted from the “rapidly evolving environment” of the crypto space.
Bakkt Issues Financial Health Warning
Bakkt filed an amendment to its quarterly report with the Securities and Exchange Commission on the 7th of February. In the amended report, the section on risk factors contained a warning that Bakkt may not be able to continue as a going concern. It outlined its financial challenges and highlighted concerns about its ability to continue in the coming year due to insufficient cash reserves.
“We might not be able to continue as a going concern. We have determined that we do not believe that our cash and restricted cash are sufficient to fund our operations for the 12 months following the date of this Amended Form 10-Q. “We cannot conclude it is probable we will be able to increase revenues substantially beyond levels that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business without raising additional capital in the near future.”
Bakkt also highlighted potential market uncertainties it could face in the future, such as possible disruptions in the crypto market, rejections from banking services, compliance failures, and other economic and business factors that could impact its operations. These developments could also render Bakkt unable to develop new services, support its current services, and maintain functional internal controls. The company stated in its filing,
“If we are unable to develop and maintain effective internal controls over financial reporting, we may not be able to produce timely and accurate financial statements. Which could have a material adverse effect on our business.”
Meanwhile, some users have wondered how Bakkt had put itself in such a situation at a time when crypto markets had seen considerable growth.
“How did ICE and Bakkt so terribly bungle things in a world where price has 10x’d, and tradfi institutions have dominated over startups in the US.”
Looking To Raise Capital
Bakkt disclosed it is looking to raise fresh capital by issuing its registered securities in the public markets to help fund its long-term vision. Once effective, a newly filed Form S-3 will allow Bakkt to issue $150 million in registered securities in the public markets to raise capital. However, Bakkt did not specify what the proceeds from the sales would be used for.
“We will retain broad discretion over the use of the net proceeds to us from the sale of our securities. We currently expect to use the net proceeds that we receive from this offering for working capital and other general corporate purposes.”
Bakkt announced its expansion into international and domestic markets, with the digital asset marketplace highlighting its plans to extend its crypto capabilities across numerous markets, serving existing and new partnerships. Bakkt expanded its operations into Mexico and Argentina with the help of its partnership with the stock trading platform Hapi. It was also set to launch in Brazil before the end of 2023. Bakkt has also made several strategic partnerships with AWS and Starbucks to enable digital asset transactions and services.
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