ICE's Cryptocurrency Venture to Go Public Through a SPAC

 ICE's Cryptocurrency Venture to Go Public Through a SPAC

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NYSE’s parent company is taking its cryptocurrency venture public.

NYSE’s parent company is taking its cryptocurrency venture public.

Photo: nicolas tucat/Agence France-Presse/Getty Images

Intercontinental Exchange Inc.,
or ICE, will take its cryptocurrency venture public by merging it with a special-purpose acquisition company, a deal that will further its goal of launching a consumer app for trading and making payments with digital assets.

The venture, called Bakkt, is expected to have a valuation of $2.1 billion after completing the merger with
VPC Impact Acquisition Holdings,
the companies said on Monday.

The deal brings together two of the hottest plays in today’s markets: crypto and SPACs.
Bitcoin,
the biggest digital currency, last week surged above $40,000 for the first time, and SPACs had their biggest year ever in 2020, raising a record $83 billion in new listings, according to data provider SPACInsider. SPACs, also called blank-check companies, are vehicles that go public to raise cash for mergers and acquisitions.

As part of the deal, Bakkt will raise an additional $532 million from VPC’s funds and a concurrent capital raise. That will support development and marketing of the Bakkt App, which is envisioned as a tool to let people manage their holdings of various digital assets. These could include bitcoin, loyalty points and reward programs, like those offered by
Starbucks Corp.
and airlines, and virtual assets from videogames.

More than 400,000 people preregistered for the app, which is expected to have a wide public rollout in March, Bakkt says. Bakkt projects the app will amass more than 30 million users in five years, according to a presentation about the deal released on Monday. That ambitious target would put Bakkt in the same league as other blockbuster financial apps like Robinhood, Venmo or
Square Inc.’s
Cash App.

Bakkt also said Monday it was hiring

Gavin Michael,
a veteran banking-technology executive, as its new chief executive. Mr. Michael was most recently head of technology for
Citigroup Inc.’s
consumer bank, and previously had a similar role at
JPMorgan Chase
& Co.

Atlanta-based ICE is best known as the parent company of the New York Stock Exchange. Its traditional core business is operating exchanges and clearinghouses used by banks and large trading firms. Bakkt is its first consumer-oriented business.

In taking Bakkt public, ICE chose to merge it with a SPAC rather than holding an initial public offering. A firm that merges with a blank-check company gains its spot on a stock exchange, much like a reverse merger. Last year, a flurry of high-profile startups used the process to go public, including sports-betting operator DraftKings Inc. and electric-truck maker
Nikola Corp.

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VPC is backed by Victory Park Capital, an investment firm based in Chicago. The deal is expected to close in the second quarter. The SPAC is listed on the
Nasdaq Stock Market,
but plans to switch to the NYSE after the Bakkt deal.

ICE will retain a majority stake in Bakkt after the deal. Bakkt will gain visibility as a publicly traded company with its own stock ticker, helping it promote its brand and the new app, ICE Chairman and CEO

Jeffrey Sprecher
said in an interview.

Mr. Sprecher has previously called Bakkt a “moonshot” bet. He said the venture has made solid progress since ICE launched it in 2018.

“It’s well off the launchpad and headed for the moon,” he said. “But it’s very hard to see within this very large company.”

Bakkt’s first CEO was

Kelly Loeffler,
who left the venture when she was appointed to be a senator for Georgia. Ms. Loeffler, who is married to Mr. Sprecher, lost a runoff election last week to her Democratic challenger.

Initially, Bakkt focused on developing bitcoin futures contracts and a custody service that can be used by hedge funds and other institutional investors to store their bitcoin.

More recently, the venture has broadened its ambitions beyond cryptocurrencies. Last year, ICE acquired Bridge2 Solutions, a software firm that supports loyalty programs for airlines, hotels and other companies, and combined it with Bakkt.

ICE and other investors have invested more than $880 million of capital and assets in Bakkt to date. The venture’s other investors include
Microsoft Corp.’s
venture-capital arm and Boston Consulting Group.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com

Corrections & Amplifications

The courtesy title for Bakkt’s first chief executive, Kelly Loeffler, was incorrectly given as “Mr.” instead of the proper “Ms.” in an earlier version of this article. (Corrected on Jan. 11, 2021)