Business context and reporting period
VPC Impact Acquisition Holdings filed this Form 10-Q for the quarter ended June 30, 2021. It was a Cayman Islands SPAC, not the operating Bakkt business: it had not commenced operations or generated revenue. Accordingly, these financial results do not describe Bakkt’s operating performance.
The SPAC had signed a merger agreement with Bakkt Holdings, LLC on January 11, 2021. The proposed transaction included a $325 million PIPE investment and remained subject to closing conditions. Assuming no public-share redemptions, the filing projected that the public company would own approximately 22% of Bakkt Opco units after closing.
Financial results and position
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 / June 30 balance |
|---|---|---|
| Revenue | None | None |
| General and administrative expenses | $1.19 million | $3.58 million |
| Net income (loss) | $21.27 million | $(12.40) million |
| Cash from operating activities | Not presented for the quarter | $(0.32) million |
| Cash outside Trust Account | — | $0.86 million |
| Cash and marketable securities in Trust Account | — | $207.39 million |
| Total assets | — | $208.44 million |
| Total liabilities | — | $42.72 million |
| Working capital | — | Deficit of approximately $3.1 million |
Quarterly net income was driven primarily by a $22.45 million noncash gain from changes in the fair value of warrant liabilities, partly offset by operating expenses. The six-month net loss reflected an $8.84 million warrant-liability fair-value expense. These valuation movements make reported earnings volatile and are not operating revenue or cash generation.
Warrant liabilities were $31.36 million at June 30, compared with $22.51 million at December 31, 2020. The SPAC reported no long-term debt or outstanding working-capital loans. The $7.26 million deferred underwriting fee was payable only if a business combination was completed.
Changes, outlook and risks
- Cash outside the Trust Account declined from $1.18 million at year-end to $0.86 million; accounts payable and accrued expenses rose from $0.89 million to $4.11 million.
- Management said it expected continued costs while pursuing the transaction. No operating or earnings guidance was provided.
- If no business combination was completed by September 25, 2022, the SPAC was required to cease operations and redeem public shares, subject to its governing terms. Management stated that inability to complete the transaction or obtain additional financing could require spending cuts and raised substantial doubt about the SPAC’s ability to continue as a going concern through one year after the financial statements if the transaction did not close.
- The filing noted potential COVID-19 effects on its financial position and transaction search, but said the impact was not readily determinable. It reported no legal proceedings and no material changes to previously disclosed risk factors.
- Management said disclosure controls were not effective because of a material weakness identified in a prior-period restatement. It described planned remediation but gave no assurance the measures would be effective.
Most important facts for investors to verify
- Whether and when the Bakkt transaction and $325 million PIPE investment closed, and the final ownership structure and redemptions.
- That this SPAC filing is not a substitute for Bakkt’s operating-company financial statements or results.
- The nature and valuation assumptions behind warrant liabilities and their effect on reported income.
- How the SPAC addressed its working-capital deficit, going-concern disclosure, and material weakness in financial reporting controls.