Bakkt, an upcoming international trading platform that is owned by Intercontinental Exchange Inc (NYSE:ICE) has reportedly been valued at $740 million just a few months after a Series A funding round.
The $740 million funding round follows the Series A funding round which took place in 2018, through which the exchange managed to raise $182.5 million. The valuation means that ICE sold as much as 25% of its stake to external investors. This is likely the case considering that it has major investors such as Starbucks Corporation (NASDAQ:SBUX), Microsoft Corporation (NASDAQ:MSFT), Pantera and Galaxy.
The valuation sets the bar high for Bakkt as far as performance is concerned
The company has achieved an impressive valuation figure despite the fact that it has not yet rolled out any investment products. It is, however, worth noting that it has been working closely with regulators and its valuation will probably go higher if the company goes for another funding round.
Money raised through capital injection is included in a company’s balance sheet and therefore part of its value once a valuation is carried out after a funding round. The challenge for the company is how it will be how it will generate the estimated returns based on the recent $740 million Series A valuation. This is also considering that Bakkt has proposed a small fee of $0.50 per contract. It will be the most affordable trading option in the U.S but analysts feel that the fee might be too low.
“From a cash-flow perspective, Bakkt will not be earning much based on their proposed contract fees, so they really need a lot of volume,” stated one analyst.
The analyst also noted that Bakkt will have to execute its services flawlessly after its launch so that it can cover expenses such as recruitment costs after its first acquisition. The exchange will have to line up a lot of things so that it can generate returns for investors.
ICE has also provided equity exemption rights for investors as indicated in an SEC filing and the rights are designed to protect investors in case Bakkt fails to deliver on its institutional adoption plan. Investors may also choose to exit if ICE delays Bakkt’s launch.
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