Summary Bakkt is pushing into the Bitcoin as a treasury for publicly listed companies trend. Liquidity continues to drop on a sequential basis with negative free cash flow during the first quarter coming in at $101 million. A $23.5 million private placement of convertible debentures post-period has extended BKKT's liquidity profile, but the company remains a sell. Bakkt ( BKKT ) is pivoting into buying and holding Bitcoin ( BTC ) on its balance sheet as part of an updated investment policy that could also see the embattled crypto firm allocate capital in other digital assets. Investing in BTC as part of a corporate treasury strategy has been all the rage in 2025, popularized by Michael Saylor's MicroStrategy ( MSTR ). The ongoing BTC rally has sparked a rush of companies emulating MSTR. BKKT's push into BTC as corporate treasury distracts from its underlying operations and ramping negative free cash flow profile that has dramatically slimmed its liquidity and threatens to push the company into further angst. I last covered BKKT in February with a sell rating, the stock has dipped nearly 10% since then and is set to go lower. BKKT held total cash, short-term investments, and restricted cash of $44.5 million as of the end of its fiscal 2025 first quarter. Removing the restricted cash component of this would place BKKT's short-term liquidity at a more than 3-year low, as negative free cash flow continues to compound angst. Data by YCharts Hence, the move to BTC as a treasury seems out of place with the company's ability to maintain normal operations from its existing liquidity balance. BKKT recorded first-quarter revenue of $1.07 billion , up 25.2% over its year-ago comp on the back of larger crypto services revenues even as revenues from loyalty services dipped. BKKT's crypto services segment is an intensely low-margin business with gross profit of just $11.12 million realized on its portion of revenue. Net income for the first quarter was positive at $7.7 million, up from a loss of $8.17 million in the year-ago period. Bulls would be right to flag that earnings per share ("EPS") at $1.13 was a material improvement from negative EPS of $1.86 a year ago, with the commons now trading hands for a 2.86x multiple to annualized first quarter EPS. This would be a steal if BKKT could sustain EPS at its current level. Bakkt Holdings Fiscal 2025 First Quarter Form 10-Q Cash Flow, Liquidity, And Risk While BKKT generated positive EPS for the first quarter, the company's free cash flow during the first quarter was negative at $101 million, a deterioration from positive free cash flow of $36.6 million a year ago. The material change in cash flow came from a negative $76.5 million movement in customer funds available and a $32 million loss from changes in the fair value of warrant liability. The overall pace of free cash flow is materially unsustainable and BKKT needs to raise more cash. Trailing 12-month free cash flow was negative at $162 million, in excess of BKKT's total short-term liquidity balance. This has materially expanded doubts about the ability of BKKT to continue as a going concern. Data by YCharts Hence, the shift to BTC as a treasury could be partially viewed through the lens of BKKT pushing to catch some of the euphoric animal spirits that have propelled some crypto-related tickers to new highs this year and sparked a rush of IPOs. Newly listed Circle ( CRCL ) was up 10x from its IPO price at its peak with crypto exchange Gemini and Peter Thiel-backed Bullish filing to go public on the back of the raging enthusiasm for crypto firms. BKKT has since been able to raise $23.75 million through a private placement of convertible debentures. The debentures will mature after just one year and accrue interest at an annual rate of 0%. The deal will mean the non-restricted portion of BKKT's cash will more than double, providing some level of depth for continued operations even as cash burn remains negative. Data by YCharts BKKT's average diluted shares outstanding are up 151% over the last 3 years on the back of equity dilution needed to expand its runway. This currently stands at less than 12 months against the pace of BKKT's trailing 12-month negative free cash flow and the post-debenture raise in liquidity. The risks for the bears, who form the 21% short interest in BKKT, are that the surge in crypto enthusiasm spills over to a buyout offer. Prior speculation that Trump Media & Technology Group ( DJT ) caused the stock price to spike and there is a non-insignificant possibility of further speculation arising. However, I'm still rating BKKT as a sell on the back of its low liquidity balance, substantial equity dilution, and negative free cash flow. Liquidity has been dipping for 3 years straight and there has not been any fundamental evolution in the company's business model that would allow them to address this shortfall. Hence, BKKT remains a sell, the company's BTC as a treasury pivot is just not material as there isn't sufficient liquidity for BKKT to acquire BTC in large enough numbers and hold it as an investment while its cash position is in such a critical position.
