Bakkt (BKKT), an institutional and retail-facing digital asset platform founded by Intercontinental Exchange, has suffered a drawdown of -6.4% after closing a volatile first day of trading as a publicly listed company.
After launching on the New York Stock Exchange at $9.45 on Monday morning, BKKT rose by roughly 3.3% up to $9.77 during its first 30 minutes of trading. However, traders quickly moved to take profits, causing prices to slump by -9.5% down to $8.84.
According to Bloomberg, BKKT was trading at $8.76 by the day’s close after having shed almost -7% from its opening.
Bakkt went public via a merger deal with a special purpose acquisition company (SPAC), VPC Impact Acquisition Holdings, on Friday.
Bakkt initially launched in 2018 as a cryptocurrency custodian. The firm has since pivoted to launch institutional-facing Bitcoin futures contracts and a retail crypto asset payments app.
Related:Crypto finserv firm Bakkt to soon trade publicly on New York Stock Exchange
Bakkt is not Intercontinental Exchange’s first foray into cryptocurrency, with the firm having participated as a lead investor in Coinbase’s Series C $75-million funding round in January 2015.
Like Bakkt, Coinbase posted a bearish performance for its first day of public trading, shedding -13.8% from a starting price of $381 over the course of the day. Intercontinental Exchange sold its stake in Coinbase for $1.2 billion during the first quarter of 2021.
Earlier this month, Bakkt announced a partnership with Google to enable its retail app users to make payments from their digital asset balances using Google Pay.
Bullish plans to go public in a reverse merger backed by former New York Stock Exchange president, Tom Farley.
The former New York Stock Exchange president, Tom Farley’s, Far Peak Acquisition Corporation announced a deal today to bring the Bitcoin exchange Bullish public, according to CNBC.
Tom Farley will be the CEO of the exchange when this is complete and the deal is expected to close by end of year. Farley was the president of NYSE for four years from 2014 2018.
Far Peak Acquisition Corporation will be giving Bullish around $600 million in proceeds and they’ll receive an additional $300 million through a private investment in public equity (PIPE). The world’s largest asset manager Blackrock along with Galaxy Digital are two of the firms participating in this PIPE.
In an interview with Squawk Box this morning, Farley bullishly said “This is a big idea whose time has come,” which is a play off the famous and iconic Victor Hugo quote of “No force on earth can stop an idea whose time has come.” Bitcoin is the biggest and most important idea going on in the world at the moment, and they aim to capture some of its success.
He also mentioned that one day one when everything is all said and done, the company will have around a $9 billion dollar balance sheet. The exchange aims to provide customers with “deep, predictable liquidity with technology that enables retail and institutional investors to generate yield from their digital assets,” per their press release.
The Bitcoin space is heating up and more and more are realizing the potential of bitcoin, how they can provide value to users, and also how they can profit from all of this. Farley then went on to add: “Digital assets are here to stay. The smartest engineering talent is going into digital assets; digital assets are solving very important problems…you’re going to see more and more interesting use cases, more and more dollars go into the space.”
Jesse Powell is rethinking Kraken’s plan to go public which is set for late 2022, following the uninspiring performance of Coinbase stock (COIN) since its launch on April 14.
Speaking with Fortune on June 11, Powell stated that in light of the performance on Coinbase’s direct public offering, the firm is now considering an initial public offering (IPO) more “seriously now,” as the firm is looking to avoid potential issues a direct listing presents:
“Not having lock-ups, having billions of dollars of insiders be able to dump their shares, you know, on day one […] I think it has a dampening effect on the market.”
“And, you know, the IPO is just a very different process,” he added. Kraken began discussing the idea of public listing in March, following Coinbase’s plans to pursue a direct listing on the Nasdaq.
Powell then followed that up in April with a timeline suggesting the firm was potentially looking to go public sometime in 2020, and told Cointelegraph that its public listing would be “too big” to go via the route of a special purpose acquisitions company (SPAC).
Related content: To IPO or Not to IPO? SPAC is the question
The roadmap is still not entirely clear, with Powell stating in the interview with Fortune that “we’ll see how the market looks in the second half of next year,” before deciding on which method to take for a public listing.
“That’s sort of where we’re targeting. You know, hopefully by then we have more analyst coverage out and there’s just more of a track record of growth for the industry,” he said.
Coinbase’s stock COIN launched with a price of around $327 on April 14, and despite the enthusiasm leading up to the firm going public, its performance has been underwhelming — decreasing around 32.4% since to $221 as of today, according to data from TradingView.
During the Interview, Powell noted that the lackluster performance of COIN may be partly due to the anti-crypto sentiment held in traditional finance and Wall Street. The Kraken CEO thinks that there a lot of players that “actually have a lot to lose” from the success of crypto, and predicted that a lot of players will resist it for “as long as possible,” noting that:
“I think you might be seeing people just facing this cognitive dissonance of becoming increasingly aware of the impending doom that’s coming to the legacy financial system.”
Patrick O’Shaughnessy, an analyst for Raymond James, an independent investment bank with a net of worth $17.76 billion, said in a note to clients regarding COIN on June 10 that:
“We don’t see a structural barrier to entry here and therefore expect significant pricing degradation over time, with growth in non-transaction revenues hard-pressed to offset this.”
From O’Shaughnessy’s perspective, Coinbase is too reliant on transaction fees to generate revenue, and expects the market to provide cheaper alternatives in the near future.
“We view it unlikely that over the long-term retail customers will continue to happily pay a 1%+ transaction fee, particularly if/when trusted financial institutions begin to offer trading and custody,” the analyst noted.
Raymond James has rated COIN as “underperform”, which is the label the firm gives to assets which it expects to underperform the S&P 500, or its sector, within the next six to 12 months and should be sold.
Powell was also quizzed on whether going public through a special purpose acquisitions company (SPAC) would be an option for the crypto exchange, and he reaffirmed the views he’d earlier expressed to Cointelegraph:
“It might have been possible a few years ago, but today I think we’re too big to really consider doing a SPAC. So we’re still on track for a public listing.”
Today, Cipher Mining Technologies announced that it plans to go public via a merger with Good Work Acquisition Corp. Cipher Mining was recently formed as a subsidiary of Dutch Bitcoin mining company Bitfury.
“The combined company, to be named Cipher Mining Inc, is expected to be listed on the Nasdaq under the ticker symbol ‘CIFR,’” Reuters reported.
Following the merger with Good Work that values the combined company $2 billion, the merged company is expected to be the largest bitcoin mining operation in the U.S, according to the announcement. Merging with Good Works, a special purpose acquisition company (SPAC), allows Cipher to sidestep the traditional IPO system in going public.
The regulation and institutionalization of Bitcoin miners will allow investors to gain exposure via trusted and recognized avenues.
“We were attracted to Cipher Mining as we believe the Bitcoin mining space represents a compelling way to gain risk-adjusted exposure to the growing crypto ecosystem,” Good Works’ Doug Wurth stated in the announcement.
“The deal will provide the merged entity with gross cash proceeds of $595 million, which includes $425 million from investors including Fidelity Management & Research Company and Morgan Stanley’s Counterpoint Global,” Reuters reported.
The transaction is representative of the growing interest in regulated, Bitcoin-focused entities. As the economic incentive for Bitcoin mining grows, these institutionalized public businesses bolster the network and invite new investment in the space.
The merger is expected to be complete before the end of Q2 2021.
Crypto market maker Apifiny is planning to go public by the end of 2021, the company announced Tuesday.
Following in Coinbase and INX’s footsteps, San Francisco-based Apifiny plans use the funds raised through the listing to finance an aggressive expansion this year,
“We think there’s more vertical ways to improve these products,” said Haohan Xu, CEO of Apifiny. “Like having better algorithms, faster connections, having more robust servers that can process more transactions per second.”
The firm’s main two product lines include Apifiny Connect, which lets institutional traders access cryptocurrency exchanges around the globe, and ExOne Plus, a market-making platform for smaller exchanges that need liquidity. Apifiny says it uses its connections to exchanges around the globe to enable better price discovery, which it uses to hedge trader’s positions.
In the past few months, the firm has added Crypto.com, Huobi Global, OKEx, Kucoin, BitMax, HBTC and Blockchain.com to its list of exchange partners.
Chinese fintech giant Ant Group was expected to go public on Nov. 5, until founder Jack Ma provoked regulators in Beijing, prompting China’s President Xi Jinping to personally pull the plug on the record-breaking $37 billion initial public offering (IPO).
After the Ant Group IPO was suspended, founder and China’s second-richest man Ma disappeared from the public view for over two months and China’s regulatory authorities also put forward five restructuring requirements for Ant Group.
The five requirements are as follows:
A return to the original intention of payment services and improve transaction transparency, and strictly prohibit unfair competition;
Operate personal credit investigation services legally and in compliance with laws and regulations, and protect personal data privacy;
Legally establish a financial holding company to strictly implement regulatory requirements to ensure sufficient capital and compliance with related transactions;
Improve corporate governance, strictly rectify financial activities such as illegal credit, insurance, and wealth management in accordance with prudential regulatory requirements; and,
Conduct securities and fund business in compliance with laws and regulations, strengthen the governance of securities institutions, and carry out asset securitization business in compliance.
However, whether Ant Group will manage to restructure itself to meet the new tightened regulatory requirements of China’s regulators still remains anyone’s guess.
How will Ant Group Restructure?
On January 15, Chen Yulu, deputy governor of China’s central bank, stated that Ant Group has established a restructuring work group under the guidance of the financial management department, and is formulating a schedule while maintaining business continuity of financial services to the public.
According to the SCMP, Ant Group is currently formulating a plan to establish a financial holding company in accordance with China’s new Financial Control Measures—officially implemented on Nov. 1. It will then fold certain businesses into the newly established financial holding company.
Ant Group had already preemptively taken steps against the financial control measures while preparing for its IPO, which were not yet in effect. The fintech giant’s prospectus—released on Aug 25, 2020—outlined that Ant Group planned to use its wholly-owned subsidiary Zhejiang Rongxin as the main body to apply for the establishment of a financial holding company and accept supervision.
There is speculation in the market that Ant Group may integrate financial-related businesses such as personal credit, fund sales, insurance, and payment into financial holding companies and accept the supervision of financial holding companies.
Currently, Ant Group already has traditional financial licenses for banking, insurance, funds, securities, as well as consumer finance, third-party payment and online small loan licenses—the most valuable financial licenses for Internet finance companies.
Ant’s subsidiary, Zhejiang Rongxin is expected to hold the equity of the relevant financial activity license subsidiary. Once included under the financial holding company, the financial business of Ant Group will be subject to strict regulatory supervision and restriction.
However, according to the types of financial institutions recognized by the central bank, it is still controversial whether or not all of the financial business of Ant Group will be included in the financial holding company.
Controversy and Controls
According to the China state regulators definitions of financial institutions, Ant Group’s most profitable quasi-financial institutions—Alipay, Huabei, and Jiebei—are out of place. And finding an appropriate definition for these businesses for them to be recognized by China’s financial management department is a major factor affecting the future of Ant Group.
Although Ant Group claims to have always been a technology company rather than a financial company, it is well known that from the perspective of revenue contribution, the micro-credit technology platform (mainly “Huabei” and “Jiebai” ) created the most important revenue, accounting for nearly 40% of the total revenue, surpassing its payment business. In addition, if online small loans (Huabei and Jiebei) and Alipay are included in the financial holding company, it will be a heavy blow to Ant’s capital adequacy ratio.
According to the “Financial Control Measures“, the establishment of a financial holding company requires that the paid-in registered capital is not less than RMB5 billion, and not less than 50% of the total registered capital of the financial institutions directly controlled.
Excluding financial services such as banks and funds, as of June 30, 2020, Ant Group has only two small loan companies in Chongqing with a total registered capital of RMB16 billion yuan.
After being included in the financial holding company, these companies may face stricter supervision. According to Article 24 of the “Financial Control Measures,” financial holding companies shall conduct comprehensive and continuous control over the corporate governance, capital and leverage ratios of the holding institutions included in the scope of consolidated management, and effectively identify, measure, monitor and control financial holdings.
But previously, the two Chongqing companies required a 2.3 times leverage ratio for small loan companies. Ant Microfinance achieved a leverage of more than 50 times through continuous issuance of ABS.
In 2018, due to compliance pressure, Ant began to issue a large number of joint loans, mainly with banks and financial institutions (funders) to jointly lend to customers.
Data shows that as of the first half of 2020, the credit balance facilitated by the micro-credit technology platform was RMB2.15 trillion yuan. This huge amount of funds did not come from Ant Group’s own funds. 98% of the funds came from financial institutions who partnered with Ant and by issuing ABS.
After the introduction of the new regulations for online microfinance, it requires microfinance companies to contribute to no less than 30% of the joint loan amount. If online microfinance is included in the financial holding company, Ant Group will face a huge gap in financing.
There is also a view that it may be difficult for the central bank to directly incorporate joint loans into the financial control regulatory framework, but it can start from the financial institution side.
First, it is requiring financial institutions to report information on cooperation with Ant including non-performing loan ratio, weighted average interest rate, balance at the end of the month, to figure out the composition of joint loans.
The second is to conduct supervision of asset management products invested or those issued by financial institutions such as banks and trusts.
As Ant Group is stepping up restructuring, there are reports that regulatory preparations have prompted technology giants such as Ant Group, Tencent Holdings and JD.com to share their consumer loan data to prevent excessive borrowing and fraud.
For Internet giants, consumer big data is an extremely important asset. Take Ant’s joint loan as an example. In cooperation with banks and other financial institutions, Ant Group has the advantage of acquiring users and risk control, and usually holds more power in cooperation.
It is reported that Ant usually charges up to 30% of technical service fees, while small banks are usually in a weak position and rely heavily on Ants’ data to approve loans and manage risks.
After the launch of Sesame Credit in 2015, Ant Group officially launched its credit investigation business. As an independent third-party credit agency, Sesame Credit integrates the behavioral data of more than 300 million real-name individuals and more than 37 million companies, and scores individual users and small companies based on their use of ant-related services.
This forms the foundation for other business such as Huabei and Jiebei, two consumer lending services. According to sources, the financial regulator plans to direct loan data from Internet giants into a unified nationwide credit agency.
In addition to the regulatory requirements, whether regulators will require Ant Group to return to its original payment business or how this process can be carried out remains a mystery.
