Trump Media and Technology Group is in advanced talks to buy Bakkt, the listed crypto firm founded and controlled by New York Stock Exchange owner, Intercontinental Exchange (ICE). That’s according to a report by the Financial Times, citing insider sources. This reinforces reports in June that the company was for sale.
President elect Donald Trump owns 53% of Trump Media, which is the owner of Truth Social, the alternative social media platform he launched after being banned by Twitter before the social media firm was acquired by Elon Musk.
Bakkt’s first CEO was Kelly Loeffler, wife of ICE founder and CEO Jeffrey Sprecher. She is also the co-head of Trump’s inauguration committee. After leaving Bakkt she became a U.S. Senator representing the State of Georgia during Trump’s first presidency.
The crypto firm has just reported its quarterly results, showing an operating loss of $27 million for the quarter. Last year’s loss for the same period was almost two times that at $53 million. Its revenues for the quarter were $328 million, up 60% on last year’s. It is currently bleeding around $89 million in cash a year and forecasts end of year cash at less than $40 million.
Bakkt’s many pivots
While many startups pivot, Bakkt has had a few more than most. Its latest pivot was announced in June. In Q4 it plans to launch an institutional trading venue, an Electronic Communication Network (ECN) for cryptocurrencies, BakktX. Partners include Hidden Road, Crossover Markets and CoinRoutes.
Its first product was Bitcoin futures launched in 2019. In early 2020 it spent almost $300 million acquiring rewards service provider, Bridge2 Solutions. It used the acquisition to launch a consumer facing digital wallet app in 2021 that supported loyalty and rewards accounts alongside crypto.
Given the company’s ICE heritage, a direct to consumer app perhaps wasn’t its sweet spot.
So two years later it dropped the consumer app with a B2B2C pivot, acquiring Apex Crypto for around $200 million in late 2022. Apex provided crypto trading services to 30 fintechs and corporates, who in turn offered services to consumers. However, Bakkt was keen to avoid falling foul of the SEC, so it reduced the range of coins on offer, although it has subsequently expanded them.
Its latest pivot towards an institutional trading venue seems the best fit for its ICE heritage. But it will face competition. In the U.S., Schwab, Citadel Securities and Fidelity Digital Assets are amongst the backers of institutional venue EDX Markets.
Trump Media’s motivations?
The most obvious motivation is a crypto friendly presidency will create a positive environment for digital assets, making it a good sector to invest in.
However, there’s some ‘alternative’ theories doing the rounds. One is from Izabella Kaminska, the former editor of FT Alphaville and now with Politico, suggesting that Trump Media would be a conduit for a Bitcoin Reserve.
Senator Lummis and others have proposed that the U.S. government create a Bitcoin reserve, although many think that will be tricky to get through Congress.
Kaminska suggests that Trump Media could be treated like a special purpose vehicle. It invests in Bitcoin, in a similar way to MicroStrategy, then if the dollar falls, it donates all Bitcoin gains to the US government. That encourages people to invest. Ms Kaminska is a long time crypto and blockchain skeptic.
Meanwhile, despite modest revenues of just $4 million in 2023, Trump Media’s market capitalization is more than $7 billion, providing a strong currency for acquisitions. Bakkt’s stock price trebled since yesterday morning, now valuing it at around $400 million.