Bakkt, Inc. current report, 15 October 2021

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Bakkt Holdings, Inc. Form 8-K Summary

Business Context and Reporting Period

Bakkt Holdings, Inc. filed a Current Report on Form 8-K regarding the completion of its business combination with VPC Impact Acquisition Holdings on October 15, 2021. The report was signed and dated October 21, 2021. VPC domesticated from a Cayman Islands entity into Delaware and changed its name to Bakkt Holdings, Inc. Bakkt’s Class A common stock and warrants began trading on the NYSE under BKKT and BKKT WS, respectively, on October 18, 2021.

Following the transaction, substantially all operating assets and business activities are held through Bakkt Opco Holdings, LLC in an up-C structure. Bakkt Holdings owned approximately 19.4% of Opco Common Units immediately after closing, with the balance held by former Opco equity owners.

Financial Metrics, Capitalization, and Liquidity

  • The filing does not provide current-period revenue, profit, margins, operating cash flow, free cash flow, debt, cash balances, or liquidity measures in the text presented.
  • Audited Bakkt financial statements for the years ended December 31, 2020 and 2019 and unaudited financial statements for the six months ended June 30, 2021 and 2020 are incorporated by reference from the proxy statement.
  • The filing includes unaudited pro forma condensed combined financial information as of and for the six months ended June 30, 2021 and for the year ended December 31, 2020 in Exhibit 99.1; the filing text does not provide the underlying values.
  • The PIPE investment raised $325 million through the issuance of 32.5 million Class A shares at $10.00 per share. The securities were sold in an unregistered offering under Section 4(a)(2) of the Securities Act.
  • Former Opco equity interests were exchanged for 208.2 million Opco Common Units and an equal number of Class V shares, of which 207,406,648 Class V shares were outstanding and 793,352 were reserved for warrant exercises.
  • The Company initially owned approximately 19.4% of Opco Common Units; ICE Holdings owned 170,079,462 paired interests, representing 81.7% of paired interests and 67.9% of total voting power as presented in the filing.
  • The 2021 Omnibus Incentive Plan became effective at closing and authorized 25,816,946 Class A shares for issuance.

Material Changes Versus the Prior Comparable Period

  • The transaction converted VIH from a special purpose acquisition company into the public operating company Bakkt Holdings, Inc. and ended VIH’s shell-company status.
  • VIH’s Cayman Islands incorporation was replaced by Delaware incorporation, with new organizational documents and modified capital, voting, board, nomination, liability, and indemnification provisions.
  • The Company entered into new Opco governance, registration rights, stockholders, voting, exchange, tax receivable, cooperation, and indemnification agreements.
  • Former Opco holders may generally exchange vested Opco Common Units and paired Class V shares for Class A shares or, at the Company’s election, cash, beginning after the six-month anniversary of closing. The initial exchange ratio is one Opco unit and one Class V share for one Class A share.
  • The Tax Receivable Agreement requires the Company to pay eligible holders 85% of certain realized or deemed realized net tax benefits associated with basis increases and related tax attributes.
  • Ernst & Young LLP replaced WithumSmith+Brown, PC as the Company’s independent registered public accounting firm. Withum reported no qualifying disagreements, but identified a material weakness related to accounting for warrants issued in VIH’s IPO; VIH had previously restated its financial statements for warrant accounting.

Guidance, Outlook, Commentary, Risks, and Unusual Items

The filing does not provide new quantitative revenue, earnings, cash flow, or operating guidance. It refers investors to the proxy statement for management’s discussion, historical financial information, business description, and risk factors.

  • Management’s forward-looking statements concern future financial performance, market conditions, expansion plans, new products and services, and growth opportunities, but the filing does not provide specific targets.
  • Key risks include failure to realize expected transaction benefits, competition, technology and regulatory changes, dependence on payment-ecosystem relationships, inability to launch or scale products profitably, acquisition execution, internal-control weaknesses, cybersecurity and data-security exposure, litigation, COVID-19 effects, and possible loss of NYSE listing.
  • ICE Holdings is subject to a voting arrangement under which voting power above 30% is generally voted in the same proportions as votes cast by other stockholders, subject to termination provisions.
  • Equity holders generally agreed to transfer restrictions through April 15, 2022, while separate sponsor lock-up provisions also apply.
  • The filing states that the Company has no current dividend policy commitment; future dividends remain subject to Board discretion, revenues and earnings, capital requirements, and general financial condition.

Most Important Facts for Investors to Verify

  1. Review Exhibit 99.1 and the incorporated financial statements for actual revenue, losses, cash flow, cash, debt, liquidity, and pro forma capitalization.
  2. Assess dilution from the 32.5 million PIPE shares, warrants, the 2021 incentive plan, reserved Opco warrant interests, and future exchanges of Opco paired interests.
  3. Review the Tax Receivable Agreement, including the potential 85% payment obligation and its effect on future cash taxes and liquidity.
  4. Confirm the governance and voting implications of the up-C structure, ICE Holdings’ ownership, and the Voting Agreement.
  5. Review the warrant accounting restatement and the material weakness identified by Withum, together with subsequent remediation disclosures.
  6. Evaluate the transaction-related lock-ups, registration rights, and potential resale supply after restrictions expire.
  7. Read the proxy statement’s risk factors and management discussion for operating assumptions and risks not reproduced in this 8-K.