Bakkt, Inc. current report, 11 January 2021

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Business Context and Reporting Period

VPC Impact Acquisition Holdings (“VIH”) filed this Form 8-K on January 11, 2021, reporting its entry into a definitive merger agreement with Bakkt Holdings, LLC (“Bakkt”). VIH was a Cayman Islands special purpose acquisition company. The transaction is intended to create Bakkt Holdings, Inc., a Delaware corporation operating through an Up-C structure.

Transaction and Key Financial Terms

  • Merger consideration consists of 208,200,000 Bakkt Opco units and 208,200,000 non-economic, voting Class V shares of Bakkt Holdings, Inc.
  • VIH entered into subscription agreements for a $325 million PIPE investment involving 32,500,000 Class A shares.
  • Bakkt’s obligations to close are conditioned, among other matters, on at least $425 million of available cash after shareholder redemptions, including trust-account cash, cash outside the trust account, and PIPE proceeds.
  • Assuming no public-share redemptions, Bakkt Holdings, Inc. is expected to own approximately 22% of Bakkt Opco at closing and will be its managing member. Former Bakkt equity holders will own the remaining Bakkt Opco units.
  • Beginning six months after closing, Bakkt Opco units may generally be exchanged for one Class A share or, at Bakkt Holdings, Inc.’s election, the cash equivalent.
  • Bakkt Holdings, Inc. will authorize 750 million Class A shares, 250 million Class V shares, and 1 million preferred shares.
  • A tax receivable agreement is expected to require payment to former Bakkt equity holders of 85% of specified realized U.S. tax savings.

Revenue, Profit, Cash Flow, Margins, Debt and Liquidity

The filing does not provide clear historical or projected revenue, net income, EBITDA, cash flow, margins, debt balances, working capital, or standalone liquidity metrics for Bakkt or VIH. Liquidity information is limited to the $425 million minimum available-cash closing condition and the $325 million PIPE commitment.

Material Changes Versus the Prior Comparable Period

No period-over-period operating or financial comparison is presented. The material change disclosed is the signing of the proposed business combination, related PIPE financing, and associated governance, support, registration, exchange, and tax agreements.

Guidance, Outlook, Risks and Unusual Items

  • The transaction remains subject to shareholder and member approvals, effectiveness of a Form S-4 registration statement, regulatory and other required approvals, satisfaction of the minimum-cash condition, absence of injunctions, and stock-exchange listing approval.
  • The agreement may be terminated if the transaction is not completed by September 30, 2021, if required approvals are not obtained, if available cash is below $425 million, or upon specified breaches or legal impediments.
  • Intercontinental Exchange Holdings, Inc. agreed to support the transaction and vote its Bakkt interests to facilitate closing. A contemplated voting agreement would limit ICE’s voting power above 30% through a proxy mechanism, subject to specified conditions.
  • Shares issued in the merger and PIPE are expected to rely on the Securities Act Section 4(a)(2) exemption, rather than a registered public offering at issuance.
  • Principal identified risks include failure to close, shareholder redemptions, inability to meet listing standards, transaction costs, delayed realization of expected benefits, COVID-19 effects, competition, technology and regulatory changes, data security, execution of growth strategies, and internal-control weaknesses.
  • The filing and related presentations contain forward-looking statements and illustrative projected or estimated information. The filing states that such information is not a guarantee or forecast of future performance.

Most Important Facts for Investors to Verify

  1. Review the eventual Form S-4 and proxy statement for Bakkt’s audited and unaudited financial statements, projections, valuation assumptions, and detailed risk factors.
  2. Verify the amount of cash remaining after VIH shareholder redemptions and whether the $425 million minimum available-cash condition is satisfied.
  3. Confirm completion of the $325 million PIPE, required shareholder and member approvals, regulatory clearances, and NYSE listing approval.
  4. Assess dilution from the PIPE, existing VIH securities, warrants, exchangeable Bakkt Opco units, and potential tax-receivable-agreement payments.
  5. Review the final ownership, governance, voting-control, lock-up, registration-rights, and ICE-related arrangements at closing.