Contributor, Benzinga
October 15, 2021

Are you looking to buy an IPO? With Sofi Active Invest you can participate in upcoming IPOs before they trade on an exchange.

Over a decade ago in 2009, an individual or entity under the pseudonym Satoshi Nakamoto penned what would become a groundbreaking white paper regarding a peer-to-peer electronic cash system. Called Bitcoin (BTC), the cryptocurrency enjoyed support from the blockchain, an innovative algorithmic platform that finally solved the trust problem that plagued earlier attempts at creating virtual currencies.

While digital tokens are nothing new, what separated Bitcoin from everything that came before it was the replacement of transactional and supply distribution brokers with an immutable intermediary. In short, for anyone to meaningfully participate in the Bitcoin network, material events must acquire the validation of public consensus, thereby disentangling monetary control from a centralized authority to decentralized consent.

As people and large institutions began recognizing the benefits of blockchain technologies — particularly lightning-quick transactions, scalability of decentralized software initiatives and borderless, frictionless access to digital investing markets — the valuation of underlying cryptocurrencies soared. With sentiment at an all-time high, demand for digital asset marketplaces like Bakkt Holdings LLC (NYSE: BKKT) have only accelerated.

Moreover, Bakkt’s initial public offering (IPO) provides speculators with an opportunity to wager on the infrastructure of cryptocurrencies, not just their individual market gyrations.

What is the Bakkt Holdings IPO Date?

One of the more anticipated new issues making its debut on the IPO calendar in the final quarter of 2021 is Bakkt Holdings. Shares are scheduled to list on the New York Stock Exchange under the ticker symbol BKKT on Oct. 18.

But like many public launches, the digital asset marketplace eschewed the lengthy and onerous path of a traditional IPO in favor of merging with a special purpose acquisition company (SPAC), in this case VPC Impact Acquisition Holdings (NASDAQ: VIH).

While SPAC stocks trade like any other public security, they are not tied to actual operations. Instead, SPACs are shell companies — also called blank-check firms — with the sole purpose of identifying a (hopefully) viable enterprise. Once achieving shareholder approval, the SPAC and the target enterprise combine, with the latter providing the business and the former facilitating access to the capital market.

To be fair, SPACs have earned a not-entirely-unfair reputation for hurting regular retail investors, with their year-to-date underperformance against benchmark indices offering confirmation. A major contributor to the red ink is the fact that SPACs are structurally dilutive: They can distribute shares and warrants that may not contribute cash to the eventual merger.

But on the positive front, these shell companies provide regular folks opportunities they may not otherwise receive. This circumstance applies to BKKT stock, which benefits from the concept of striking while the iron’s hot. After all, no one knows when the digital asset bubble will burst.

Bakkt, owned by Intercontinental Exchange Inc. (NYSE: ICE), enjoys significant support from powerful Wall Street titans, including institutional backing from Microsoft Corp. (NASDAQ: MSFT) and Boston Consulting Group. Notably, former Georgia Sen. Kelly Loeffler supports BKKT stock. Before her time in the Senate, she was the CEO of Bakkt.

Ultimately, though, interested investors will want to take a measured approach to BKKT. Not only is the underlying virtual currency sector extremely volatile, the competition for digital asset marketplaces is incredibly competitive.

Bakkt Holdings Financial History

In September 2020, VPC Impact Acquisition launched its IPO, which involved the distribution of 20 million shares at a per-unit price of $10. When VPC was in its pre-merger announcement phase, the shell company indicated that it intended to pursue a business combination with a financial technology (fintech)-related firm.

Initially, VIH stock meandered around the $10 level until the Bakkt Holdings disclosure, at which point shares skyrocketed. Although the equity unit that will eventually become BKKT remained elevated for a few months, a steep correction in the crypto sector brought shares down to the $10 level again.

Starting the morning session of Oct. 15, VIH swapped hands around the $9.60 level, a conspicuous discount to its initial offering price. Adding to the perplexity, Bitcoin was trading at just less than $60,000 at the time, which implies a lack of a neat correlation between BKKT and the underlying virtual currency market. Still, prior corrections in bitcoin have led to sharp losses in BKKT, emphasizing the importance of vigilance.

But the risk involved with anything related to cryptocurrencies hasn’t stopped institutional investors from pouring their dollars in to bolster BKKT. For one thing, the business combination between Bakkt and VPC Impact values the digital asset marketplace at $2.1 billion. In addition to the $207 million the SPAC raised, Bakkt benefits from a $325 million private investment in public equity (PIPE) funding round, of which $50 million came from Intercontinental Exchange.

Should no VPC Impact stakeholders redeem their equity ownership, Bakkt will own 78% of the business combination, with VPC and the PIPE investors splitting the remaining equity.

Although one of the driving incentives of BKKT is the ability to gain some exposure to the Bitcoin market without directly trading in cryptos, investors should know that the underlying firm is an early stage company, featuring revenue of approximately $9 million against expenses running $39 million. That’s a relatively small sales profile, suggesting a rich premium for BKKT.

Bakkt Potential

At this moment, nothing is hotter than Bitcoin. Dancing above and below the psychologically critical threshold of $60,000, the original cryptocurrency enjoyed a demand surge from the upcoming introduction of the crypto-related exchange-traded fund (ETF) ProShares Bitcoin Strategy ETF.

Investor interest doesn’t necessarily center on the ETF itself but, rather, rumors that the Securities and Exchange Commission will not interfere with the fund’s launch. If that’s the case, it would imply that regulatory authorities will not crack down on virtual currencies like other countries — most notably China — have.

Lending support to this rumor is Federal Reserve Chairman Jerome Powell. According to a report from The Wall Street Journal, Powell stated that the U.S. government did not have any plans to ban cryptos. That led to a reactionary surge in Bitcoin and supposedly bodes well for future upside valuations.

Nevertheless, prospective buyers of BKKT stock should be aware that this narrative is in flux. For instance, a few months back in August, Powell stated that the U.S. lacks a regulatory framework for virtual currencies, a circumstance that might need to be addressed. That statement indicates that wagering on the words of policymakers can go either way.

Also, it would behoove investors to assess Coinbase Global Inc. (NASDAQ: COIN) shares before diving into BKKT. Frankly, COIN’s performance over the trailing half year has been unimpressive. Coinbase’s historical revenue also has ebbed and flowed with the fortunes of Bitcoin, implying volatility risk for Bakkt.

How to Buy Bakkt Holdings IPO (BKKT) Stock

Although SPACs have no underlying operations, they trade just like a regular equity-based security — if you already know how to buy stocks, you can jump in right away. If you don’t, you can enjoy a crash course with the following steps:

Step 1: Pick a brokerage.

While any reputable brokerage will allow you to buy SPAC shares, if you’re serious about building your acumen, you may want to narrow your list of best brokers to platforms that provide access to alternative opportunities, such as pre-IPO shares or new issues at their initial offering price.

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Step 2: Decide how many shares you want.

Because of the vagaries of the unknown, all IPOs carry risk so you should invest with a balanced share count to mitigate possible downside movements.

Step 3: Choose your order type.

Before placing your 1st order, understand these market concepts.

  • Bid: The bid is the buyer’s best offer for a stock
  • Ask: The ask is the lowest price the seller will accept.
  • Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers. Narrower spreads imply higher volume and therefore lower risk. The opposite is true for wider spreads.
  • Limit order: Buying or selling requests at a specific price, limit orders provide transparency but no execution guarantees.
  • Market order: Market orders guarantee fulfillment but only at the current rate.
  • Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
  • Stop-limit order: Stop-limit orders only exit positions at a specified price, but they also carry non-fulfillment risks.

Step 4: Execute your trade.

Follow these steps to execute a market order:

  1. Select your action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Follow the same sequence for limit orders, but include your execution price.

BKKT Restrictions for Retail Investors

Before you participate in any IPO, consult the Financial Industry Regulatory Authority (FINRA) guidelines on restricted persons to avoid legal unpleasantries.

BKKT pre-IPO

As a SPAC that’s about to close its business combination, any pre-IPO opportunities for BKKT stock have passed. However, for those angling for future public market debuts, you should consider opening an account with ClickIPO Securities LLC. The company provides pre-IPO access for select enterprises with public ambitions.

A Secondhand Bitcoin Play

Although Bitcoin is an extremely wild investment, its decentralized nature delivers an unprecedented accessibility to capital markets. Still, betting on the asset itself may be too risky for many investors. If you fall into that camp, BKKT stock offers indirect exposure to cryptos, suiting those more familiar with traditional markets.

Disclosure: The author held a long position in Bitcoin.

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