ICE Targets Startup Crypto Managers With Bakkt
As more and more money rushes into cryptocurrencies for a safe haven, it is only natural that the investment side of the crypto business is also starting to heat up as well. In the latest move, Intercontinental Exchange's Cryptocurrency Venture has agreed to acquisition by VPC Impact Acquisition Holdings, Inc. (ticker VIH). VIH is what is known as an SPAC or Special Purpose Acquisition Company. SPACs are shell companies whose only function is to acquire other companies and bring them onto the stock market.
Rather than going through the many regulatory hurdles of making an IPO under their own name, Intercontinental can spin off this part of their business and get it onto the exchange much faster and with less regulatory interference by allowing it to be "acquired" by an existing firm already listed on the exchange. The process is technically a reverse merger but a very specialized one that is distinct in almost everything except name.
Under a standard reverse merger format, ICE would spin off the crypto side of the business into a separate company, which would then be free to pursue its destiny any way it wants. Instead, ICE will retain a majority stake in the new venture, which will be known as Bakkt, while VIH will put upwards of 500 million dollars into the new enterprise in the form of marketing and product development.
Bakkt Killer App
The underlying purpose of the Bakkt venture is to create a killer app for consumer use of cryptocurrencies and other digital assets such as rewards points, loyalty bonuses, and even credits from video games. By folding all of these disparate programs into one easily-accessed processing point, the company hopes to gain a foothold in all things crypto no matter where they originate from.
Since the company itself is the brainchild of ICE, which is the parent of the NYSE, and has other heavy hitters such as Microsoft's development arm signed up for a piece of the action, it seems likely that many less-well-endowed competitors will be facing the merge-or-die choice which has confronted so many of Facebook's rivals over time. Yet by cleverly putting it at arm's length from the behemoth corporate parent, it does not appear to be quite as much of a monopoly risk in terms of regulatory policy.
So far as prospects go, there are already over 400,000 people who have pre-registered for Bakkt, which is expected to launch sometime in March. That suggests Bakkt is going to grow rapidly as soon as there is an actual product release and some publicity generated by that 500 million from VIH. The current CEO of Bakkt, incidentally, is now-defeated Georgia Senator Kelly Loeffler, although a new CEO with more experience in the nuts-and-bolts of banking is on deck.
Bakkt going public through a SPAC: Intercontinental Exchange and Bakkt CEOs