Digital assets platform Bakkt completes the acquisition of Apex Crypto

Bakkt CEO Gavin Michael With permission from Bakkt

New York-based Bakkt announced Monday that it received regulatory approval to acquire trading infrastructure provider Apex Crypto in one of the largest deals in the crypto landscape since the beginning of the bear market in mid-2021. In the deal, publicly traded Bakkt will pay $55 million in cash plus $100 million dollars on shares.

While Bakkt first announced the purchase in November, it had to wait for regulatory approval from the New York Department of Financial Services, where Bakkt has both a BitLicense and trust charter, as well as a number of other states where Bakkt and Apex have money transmitters. licenses.

Bakkt, which offers trading and custody services, went public in October 2021 through a special-purpose buyout company, but its share price has plunged nearly 96% from a peak shortly after the listing. For CEO Gavin Michael, the acquisition of Apex represents a path to profitability for Bakkt as it looks beyond the crypto winter.

“We’re really positioning ourselves for the next wave,” he said Fortune in an interview on Friday. “Crypto is here to stay.”

Bakkt’s next chapter

Since its founding in 2018, Bakkt has tried out different approaches to crypto markets, including offering Bitcoin futures trading to institutional investors, as well as a direct-to-consumer crypto-powered rewards program. According to Michael, Bakkt has settled on what he describes as a business-to-business-to-consumer strategy, or B2B2C in industry terms, which means that Bakkt offers its services to other businesses, which in turn serve private customers.

As an example, Bakkt works with community banks and credit unions to help them build an embedded online experience into their digital platforms where their users can trade Bitcoin. In other words, Bakkt works as a simple Bitcoin exchange incorporated into other financial platforms. As a trust company, it also offers Bitcoin custody services to institutional clients, meaning it will hold Bitcoin on their behalf. Bakkt received a trust charter from NYDFS in 2019 and a BitLicense in 2021.

In February, Bakkt shut down its consumer-facing crypto rewards app, where companies could offer customers crypto incentives. Michael said Bakkt is still working with clients to help them manage rewards programs, including hotel and casino giant Caesars Entertainment.

Bakkt has an impressive pedigree, originally launched by Intercontinental Exchange, the operator of the New York Stock Exchange, as its first foray into crypto. Nevertheless, Bakkt has struggled to find a winning strategy, with The information reported on Friday that it laid off employees in December and March and plans to reduce its workforce by 40% by the end of 2023, compared to the end of 2022. Bakkt currently has a market capitalization of just over $456 million.

Apex presents a lifeline for the company. A so-called “turnkey platform”, Apex has a similar model to Bakkt, allowing other businesses to implement crypto trading into their services. Michael said that Apex has a wider range of cryptocurrencies that it offers, as well as serving a wider range of businesses, including neobanks and other financial technology companies. Two of Apex’s clients are the financial services company WeBull and the investment platform Public.com.

With the acquisition of Apex, Bakkt will gain its nearly 6 million crypto-enabled accounts, 30 corporate customers and $12.5 billion in crypto sales. Michael said Apex will also help it expand into overseas markets, noting that many of its existing fintech customers operate internationally. The company hopes to be EBITDA positive in 2024.

“We want to be able to scale the business efficiently,” Michael said Fortune.

Given the regulatory difficulties facing the crypto industry, the acquisition represents a rare bright spot for the sector, with Bakkt working with its regulator, the NYDFS, to finalize the deal.

“It’s been tough the last few months,” Michael said. “We’re able to really show that there are thoughtful, risk-focused players who are able to positively impact the space.”