Bakkt may have acquired RCG for $19 million

Quick Take

  • Q1 reports from Bakkt’s majority shareholder ICE shows a mysteriously unaccounted-for $19 million cash figure under mergers and acquisitions
  • Bakkt partially acquired Rosenthal Collins Group in Q1 but ICE does not appear to have made any acquisitions of its own
  • This suggests that Bakkt may have paid $19 million for its first acquisition, which sources say is an “unusually high” amount
  • Further understanding of Bakkt’s acquisition prices may give an insight into the timing of Bakkt’s next funding round

Crypto exchange Bakkt likely paid $19 million for the acquisition of Rosenthal Collins Group (RCG), an analysis of its parent company ICE’s Q1 financial filings suggest. 

Bakkt and ICE declined to confirm, so it’s impossible to say categorically, but here are the puzzle pieces to an ever-interesting jigsaw.

The sum of $19 million is listed in ICE’s Q1’19 consolidated cash flow statement under ‘investing activities.’ This shows all cash movements from investing operations in the business and any cash paid by its subsidiaries (of which Bakkt is one).

The $19 million figure is mysteriously not explained, but can be attributed to Bakkt by process of elimination. Neither ICE’s other subsidiary (NYSE) nor ICE itself have completed any public acquisitions in the last quarter. Indeed, the only acquisition mentioned in ICE’s most recent earnings call was that of RCG.

ICE also has a track record of explaining its purchases in its statements. For instance, in Q1 2018, it explained the figure listed in this section of the statement – noting its $400 million acquisition of Bond Point. On this occasion however, the Q1 2019 figure is not attributed to ICE; perhaps because it is a far smaller purchase…or perhaps because it is Bakkt’s.

Hence, assuming ICE or its other subsidiary NYSE did not do any deals in Q1, and no payments were deferred, “then the $19 million figure is very likely for RCG”, one analyst told The Block.

Captured from page 9 of ICE’s most recent filings.The two columns on the left show the investments from Q1 2019 and Q1 2018 respectively. Because Bakkt is controlled by ICE, its investments sit on its books.

RCG was a futures commission merchant based in Chicago, but sold its client accounts and front-office to a firm called Marex Spectron last December. Bakkt then acquired the back-end and brought on several members of the RCG team in February according to its blog post.

But sources say the $19 million price tag for RCG’s back-end systems and team is rather high for what it is. Still, others pointed out that given Bakkt raised over $182.5 million, “they can afford a crazy overhead,” and that acquisitions of this sort are central to its business model.

Bakkt has since made a second acquisition, in the Digital Asset Custody Company (DACC). Notably, Jeff Sprecher, ICE’s CEO, said on an earnings call last week that the crypto winter had helped make the purchase of DACC affordable. 

“[We] acquired a company earlier this week that wouldn’t have been available to us had this market been really hot because valuations were really hot,” he said. Given the deal is believed to have closed in Q2, the price will likely be revealed in ICE’s next filings.

These two acquisitions – most likely in cash – plus a 40-person strong team means Bakkt’s burn rate could be higher than expected. Hence, while it awaits regulatory approval and revenues remain stalled,  fundraising conversations may resume earlier than expected.

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