Bakkt, Inc. current report, 02 November 2022

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Bakkt Holdings, Inc. Form 8-K Summary

Reporting period and event: The filing reports events dated November 2, 2022, with the report signed November 3, 2022. Bakkt entered into an agreement to acquire Apex Crypto LLC, a wholly owned subsidiary of Apex Fintech Solutions Inc., through Bakkt Marketplace, LLC.

Transaction Terms and Strategic Context

  • Bakkt will pay an initial purchase price of $55.0 million in cash, subject to customary adjustments for transaction expenses, indebtedness, and net working capital.
  • The transaction includes potential contingent consideration of up to $145.0 million tied primarily to Apex Crypto’s cryptocurrency facilitation gross-profit performance for 2022, 2023, and 2024.
  • Additional NFT-related contingent consideration may be payable, subject to a $12.0 million cap and an overall transaction consideration cap of $200.0 million, including the initial cash payment and non-NFT contingent consideration.
  • Contingent consideration is generally payable in Bakkt Class A common stock, although cash or subordinated seller notes may be required in specified circumstances.
  • Contingent shares are capped at 19.9% of the relevant outstanding Class A and Class V common shares. Any excess value may be paid through seller notes maturing 30 months after issuance, with interest set at the greater of the Wall Street Journal prime rate or 1%, plus 2%.
  • At closing, the parties expect to enter into a four-year commercial agreement making Bakkt and Apex Crypto preferred providers of B2B2C cryptocurrency and NFT facilitation services for Apex Clearing Corporation.

Financial Metrics and Liquidity

This 8-K does not provide period-specific revenue, profit, cash-flow, margin, debt, or liquidity results for Bakkt or Apex Crypto. The filing specifies a $55.0 million upfront cash obligation and potential additional consideration but does not state how the purchase will be funded or its expected effect on Bakkt’s financial statements.

Material Changes Versus the Prior Comparable Period

  • The filing announces a proposed acquisition rather than reporting operating results or a comparison with a prior period.
  • If completed, the acquisition would expand Bakkt’s cryptocurrency and NFT facilitation capabilities and add Apex Crypto as a wholly owned subsidiary.
  • The transaction could result in substantial future stock issuance, cash payments, or seller-note obligations depending on performance and applicable contractual limits.

Conditions, Timing, and Risks

  • Closing is subject to customary conditions, including expiration of applicable waiting periods under the Hart-Scott-Rodino Act and regulatory approvals from the New York State Department of Financial Services and certain state money-transmission regulators.
  • Either party may generally terminate if closing has not occurred by July 31, 2023. If the sole remaining issue is specified regulatory approval, the outside date may extend to September 30, 2023 by agreement.
  • There is no assurance that the transaction will close, that performance targets will be achieved, or that anticipated commercial benefits and synergies will materialize.
  • Key disclosed risks include regulatory changes, competitive and technology developments, data-security risks, inability to execute growth or acquisition strategies, COVID-19 impacts, and failure to satisfy closing conditions.
  • The Stockholders’ Agreement imposes transfer restrictions on specified contingent shares and standstill provisions on the investor group through December 31, 2025, with restrictions on short sales through January 1, 2025.

Investor Verification Points

  1. Verify whether the acquisition received all required regulatory approvals and ultimately closed.
  2. Review the full Purchase Agreement for purchase-price adjustments, performance formulas, termination rights, and indemnification limitations.
  3. Assess Bakkt’s available cash, financing sources, and liquidity impact from the $55.0 million upfront payment.
  4. Monitor potential dilution from contingent shares and any seller-note obligations.
  5. Evaluate Apex Crypto’s actual gross profit and client performance against the 2022–2024 earnout thresholds.
  6. Review subsequent filings for acquisition accounting, goodwill or intangible-asset recognition, integration costs, commercial-agreement performance, and changes to Bakkt’s risk profile.