BKKT Stock is a Sad Digital Asset Platform Story that should be avoided

Imagine that on October 18, 2021, you had the revelation to buy shares of Bakkt Holdings (NYSE:BKKT) and keep them for about two weeks. On November 1, 2021, you had the best idea ever, at least for 2021. At one point, you verified your trading account, and you couldn’t believe your eyes! Your BKKT stock has hit a high of $ 50.80. You got a return of 479%, turning your hypothetical investment of $ 100,000 into $ 579,900! You decide not to go greedy and do what any rational person would do, hit the sell button on your stock brokerage platform.

Source: Shutterstock

Let’s call this investor the lucky one. As you can guess, there is another investor, the unlucky one. Assuming the unlucky investor invested the same amount hypothetically under the same trading conditions. They would check their BKKT stock trading balance on January 6, 2022, hoping that the Santa Claus stock rally is in full force. Unfortunately, the reality is harsh with 30% losses.

As you might have guessed by now, I’m not optimistic about Bakkt. I will try to explain why I believe this and why BKKT stocks should simply be avoided.

Bakkt & Crypto

Bakkt Holdings is a digital asset platform story that did not go as planned as it is a subsidiary of Intercontinental exchanges (NYSE:ICE).

This tech company combines the fashionable trend of PSPCs, with the cryptocurrency market, according to their website, “connecting the digital economy” with the mission of “fueling commerce by reimagining the ecosystem of digital assets.” .

Bakkt and VPC Impact Acquisition Holdings merged and investors were granted access to public shares of BKKT in October 2021. What a digital asset experience so far, full of excitement and drama.

I think the person who runs the Bakkt blog celebrating its IPO milestone, maybe has been fired or is too busy to update the content because updates are infrequent.

Another blog post on Bakkt’s partnership with Bringme.com connecting the gid economy to crypto experiences makes me incredibly skeptical about offering cryptocurrency as a form of payment.

Cryptos are very volatile and are not a generally accepted method of payment for goods and services. If I was offered compensation in cryptocurrency rather than fiat currency, I would immediately decline it. Cryptocurrency is the opposite of stable assets, and the Federal Reserve’s latest comments that signal tighter monetary policy sooner than expected do not support risky assets such as cryptocurrencies.

BKKT action: where is the economic gap?

During the Business Analyst Day presentation, the digital asset platform identified the problem of struggling to manage all of your digital assets. Bakkt’s list of “digital assets” ranges from non-fungible tokens (NFTs) to loyalty points and stocks. But why is it so difficult? Where is the problem sought by this solution?

To me, this sounds like a marketing attempt to artificially create a problem.

Not all people who deal with digital assets are interested in NFTs or even crypto. The pandemic has hurt airline and hotel rewards, so the added value there is negligible for now. And stocks are easier to manage on other more specialized brokerage platforms.

It’s not that I don’t see any value in Bakkt’s main post: having a platform that helps you multitask and manage your digital assets. A platform where you can invest, convert, spend, make payments, redeem rewards. However, the goal of turning consumer spending into the use of crypto is just too risky.

I’m also not arguing that digital assets aren’t the powerhouse of a vibrant new economy or that the $ 1.6 trillion usable addressable market (SAM) for digital assets isn’t huge.

I claim the momentum built for the BKKT stock has been lost. And for two good reasons: weak fundamentals and a high valuation.

Third Quarter 2021 Results: Widening YoY Net Loss

On a year-over-year basis, Bakkt saw 38% revenue growth and 60% increase in operating expenses. The net loss of $ 28.8 million was higher than the net loss of $ 18 million in the third quarter of 2020.

A review of key priorities such as building partnerships with the business to business to consumer (B2B2C) model, improving products, seeking expansion opportunities, all point to a growing problem: operating expenses will continue. likely to increase.

In the first nine months of 2021, Bakkt lost money. Cash flow from operations was also negative. In other words, the business cannot yet generate cash in the course of its normal business activities. It is a serious problem.

Investors may want to give the publicly traded company time to prove that its platform has an economic divide. Based on the company’s growing net losses alone, early financial results are not optimistic. I also think the Intercontinental Exchange should not be happy with Bakkt’s latest financial performance at all. The Federal Reserve is not alone to blame for these disappointing results.

The cryptocurrency market could quickly deflate in 2022 if a risky mood gains popularity with value investing. This would mean even more bad news for Bakket and BKKT shares.

As of the publication date, Stavros Georgiadis, CFA does not have (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Stavros Georgiadis is a CFA Chartered Equity Research Analyst and Economist. He focuses on US stocks and has his own stock blog at thestockmarketontheinternet.com/. He has written various articles for other publications in the past and can be contacted on Twitter and on LinkedIn.

Comments are closed.