Bakkt (BKKT) risk factors, FY2024 10-K

Risks Related to Our Business, Finances and Operations

1. 01Our business model is newly developed and may encounter additional risks and challenges as it grows
2. 02Substantially all of our net revenues each quarter come from transactions that occur during that quarter, which has resulted in, and may continue to result in, significant fluctuations in our operating results
3. 03agreements, for such products and services, and to do so on terms sufficiently favorable to us. While we continue to negotiate client agreement terms, we may be unable to agree to terms with such clients on commercially advantageous terms or at all, which may adversely affect our business and prospects
4. 04Any of the foregoing could, among other things, adversely impact our stock price, make us less competitive compared to our peers and otherwise significantly adversely affect our business
5. 05We face substantial and increasingly intense competition worldwide in the industries in which we operate
6. 06We partner with many businesses and consider the ability to continue establishing these partnerships important to our business. Competition for relationships with these clients is intense and there can be no assurance that we will be able to continue to establish, grow, or maintain these client relationships
7. 07If our platform does not meet our service level commitments, our revenue and reputation may be negatively impacted
8. 08We face operational, legal and other risks related to our reliance on third party vendors, over which we have no control
9. 09If we cannot keep pace with rapid technological developments to provide new and innovative products and services, the use of our products and services may not develop, and, consequently, our business would suffer
10. 10In connection with the sale of Bakkt Trust we may become subject to retained liabilities and other risks that could adversely affect our business, financial condition and results of operations
11. 11We may not realize the expected benefits under the Cooperation Agreement and may be unable to successfully negotiate the terms to acquire DTR, either of which could adversely affect our business, financial condition and results of operations
12. 12Moreover, if we establish terms of the put/call option, and we acquire DTR or DTR exercises its right for us to acquire DTR, we may not realize the expected benefits of such acquisition. For additional information regarding the risks related to potential acquisitions, see the following risk factor
13. 13We have in the past and may in the future seek to acquire or invest in businesses, joint ventures, partnerships, alliances and platform technologies that we believe could complement or expand our platform, enhance our technology, or otherwise offer growth opportunities
14. 14We may require additional capital to support the growth of our business, and such capital might not be available on acceptable terms, if at all
15. 15In the past, we have identified conditions and events that raised substantial doubt about our ability to continue as a going concern and it is possible that we may identify conditions and events in the future that raise substantial doubt about our ability to continue as a going concern
16. 16We hold our cash and cash equivalents that we use to meet our working capital and operating expense needs in deposit accounts that could be adversely affected if the financial institutions holding such funds fail
17. 17The loss of the services of our senior management could adversely affect our business
18. 18Our business will suffer if we fail to attract and retain highly skilled employees
19. 19Our revenue is impacted, to a significant extent, by the general economy
20. 20If we experience rapid growth, it may place significant demands on our operational, administrative and financial resources and it may be difficult to sustain such growth
21. 21Future material impairments in the value of our long-lived assets, including goodwill, have in the past negatively affected, and could in the future negatively affect, our operating results
22. 22We may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and might experience business disruptions and adverse tax consequences associated with restructuring, realignment and cost reduction activities
23. 23Environmental, social and governance factors may impose additional costs and expose us to new risks

Risks Related to Crypto

1. 24Regulations governing crypto and blockchain may change rapidly, which may force us to change our business quickly to adapt and may change the competitive landscape
2. 25Volatility and disruptions in the crypto market may subject us to additional risks
3. 26including those caused by any recession or economic downturn that may occur, and we may experience material and adverse impacts to our business as a result
4. 27Due to unfamiliarity and some negative publicity associated with crypto platforms, existing and potential customers may lose confidence in crypto platforms, which could have an adverse impact on our business
5. 28There may be a perception among regulators and others that crypto is used to facilitate illegal activity such as fraud, money laundering, tax evasion and scams. Because we provide the ability to transact in crypto, any negative perceptions associated with crypto could harm our reputation
6. 29Further, banks may not provide banking services, or may cut off banking services, to businesses that provide crypto-related services, which could dampen liquidity in the market and damage the public perception of crypto generally or any one crypto asset in particular, which could decrease the trading volume of crypto
7. 30public insurer to offer recourse to us or to any consumer and the misappropriated crypto may not be easily traced to the bad actor
8. 31Our failure to safeguard and manage our customers’ crypto could adversely impact our business, operating results, and financial condition
9. 32Crypto does not have extensive historical precedent, and distributed ledger technology continues to rapidly evolve. The unique characteristics of crypto presents risks and challenges to us that could have a material adverse effect on our business
10. 33We may encounter technical issues in connection with the integration of supported crypto assets and changes and upgrades to their underlying networks, which could adversely affect our business
11. 34Excessive redemptions or withdrawals, or a suspension of redemptions or withdrawals, of crypto assets could adversely impact our business

Risks Related to Regulation, Taxation and Laws

1. 35Our business is subject to extensive government regulation, oversight, licensure and approvals. Our failure to comply with extensive, complex, uncertain, overlapping and frequently changing rules, regulations and legal interpretations could materially harm our business
2. 36Regulatory regimes governing blockchain technologies and crypto are evolving and uncertain, and new legislation, regulations, guidance and enforcement actions have in the past required, and may in the future require, us to alter our business practices
3. 37reportedly dropped several enforcement cases involving these types of actions, including that against Coinbase
4. 38Furthermore, if we remove any assets from trading on our platform, our decision may be unpopular with our customers and may reduce our ability to attract and retain customers, especially if such assets remain traded on unregulated exchanges, which includes many of our competitors
5. 39We are subject to significant litigation risk and risk of regulatory liability and penalties. Any current or future litigation or regulatory proceedings against us could be costly and time-consuming to defend
6. 40Bakkt Holdings, Inc. is a holding company, its only material asset is its interest in Opco, and it is accordingly dependent upon distributions made by its subsidiaries to pay taxes and expenses, make payments under the Tax Receivable Agreement and pay dividends
7. 41In certain cases, payments under the Tax Receivable Agreement may exceed the actual tax benefits we realize or such payments may be accelerated
8. 42We may have to constrain our business activities to avoid being deemed an investment company under the Investment Company Act
9. 43would be restricted, which would adversely affect our business, financial condition and results of operations. In addition, we may be forced to make changes to our management team if we are required to register as an investment company under the Investment Company Act
10. 44Failure to comply with anti-bribery and anti-corruption laws and similar laws could subject us to penalties and other adverse consequences
11. 45We are subject to federal and state consumer protection laws and regulations in the jurisdictions in which we operate, which may result in liability or expense, including potential private rights of action, if we do not comply, or it is alleged that we do not to comply, with such laws
12. 46Complying with evolving privacy and other data related laws and requirements may be expensive and force us to make changes to our business, and failure to comply with such laws and requirements could result in substantial harm to our business
13. 47We may be unable to sufficiently protect our proprietary rights and may encounter disputes from time to time relating to our use of the intellectual property of third parties
14. 48Regulatory requirements upon a change of control of our regulated subsidiaries may require an investor to obtain prior approval or submit information to regulators upon acquiring a direct or indirect controlling interest in us
15. 49Our tax information reporting obligations with respect to transactions involving loyalty points or other incentives are subject to change
16. 50Changes in tax laws or their judicial or administrative interpretations, or becoming subject to additional taxes that cannot be passed through to our loyalty customers, could negatively affect our business, financial condition and results of operations
17. 51Our ability to use net operating losses to offset future taxable income may be subject to certain limitations under U.S. or state tax law
18. 52We may be subject to various governmental export control and trade sanctions laws and regulations that could impair our ability to compete in international markets or subject us to liability if we violate these controls

Risks Related to Information Technology and Data

1. 53Actual or perceived cyberattacks, security incidents or breaches could result in serious harm to our reputation, business and financial condition
2. 54Systems failures and resulting interruptions in the availability of our websites, applications, products or services could harm our business
3. 55If we use open source software inconsistent with our policies and procedures or the license terms applicable to such software, we could be subject to legal expenses, damages, or costly remediation or disruption to our business

Risks Related to Risk Management and Financial Reporting

1. 56required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm
2. 57Real or perceived inaccuracies in our key operating metrics may harm our reputation and negatively affect our business
3. 58If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected
4. 59Our management has limited experience in operating a public company
5. 60If members or former members of our management engage in business activities of the types conducted by us, we may be materially adversely affected
6. 61We are a “smaller reporting company” and any decision to comply with certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our securities less attractive to investors
7. 62Future changes in financial accounting standards may significantly change our reported results of operations

Risks Related to Our Securities

1. 63We may issue additional shares of common stock or other equity securities, which would dilute stockholders’ ownership interest in us and may reduce the market price of our securities
2. 64Our warrants are exercisable for Class A Common Stock. Any such exercise increases the number of shares outstanding and eligible for future resale in the public market and results in dilution to our stockholders
3. 65We may not receive any additional funds upon the exercise of the Warrants
4. 66The valuation of our warrants could increase the volatility in our net income (loss) in our consolidated statements of operations
5. 67If securities and industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the prices and trading volumes of our securities could decline
6. 68Delaware law and our Certificate of Incorporation and By-Laws contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable
7. 69We cannot predict the impact our dual class structure may have on the stock price of our Class A Common Stock
8. 70Our Certificate of Incorporation does not limit the ability of ICE to compete with us
9. 71ICE may exert significant influence over us and its interests may conflict with yours or those of other stockholders in the future
10. 72The price of our securities may be volatile
11. 73Because there are no current plans to pay cash dividends on the Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your Class A Common Stock at a price greater than what you paid for it