SCHEDULE: Bakkt Reorganizes, Amends TRA with ICE and Naheta

Bakkt Holdings, Inc. announced a corporate reorganization to eliminate its Up-C structure, becoming a subsidiary of a new public holding company, accompanied by amendments to its Tax Receivable Agreement and related agreements with Intercontinental Exchange Holdings, Inc. and CEO Akshay Naheta.

Summary

• Bakkt Holdings, Inc. is undergoing an "Up-C Collapse" reorganization to eliminate its umbrella partnership-C-corporation structure.
• Bakkt Holdings, Inc. will become a wholly-owned subsidiary of a new holding company ("NewCo"), which will replace it as the public company trading on the New York Stock Exchange.
• The Up-C Collapse will constitute a Change of Control under the existing Tax Receivable Agreement (TRA), accelerating all obligations.
• An amendment to the TRA (TRA Amendment) was executed on October 16, 2025, to be effective immediately prior to and subject to the consummation of the Up-C Collapse.
• The TRA Amendment sets the Early Termination Rate at 18% per annum, compounded annually.
• For Intercontinental Exchange Holdings, Inc. (ICE) and Akshay Sudhir Naheta (designated as Majority TRA Parties), the Early Termination Payment is capped at the value calculated as if the Early Termination Date was the date of the TRA Amendment.
• ICE and Akshay Naheta will contribute their TRA rights to NewCo in exchange for a cash payment, then contribute that cash back to NewCo for newly issued NewCo Class A Common Stock.
• The number of NewCo Class A shares issued to ICE and Akshay Naheta will be based on a purchase price of $39.34 per share, representing the "Minimum Price" as defined in NYSE Rule 312.04(h).
• Intercontinental Exchange Holdings, Inc. (ICEH) has waived its right to treat the Up-C Collapse as a "Fundamental Change" under its warrants, provided it receives equivalent warrants in NewCo.
• ICEH also agreed not to transfer its warrants until the earlier of the Up-C Collapse consummation or November 14, 2025.
• The Up-C Collapse and related contributions are intended to qualify for nonrecognition tax treatment under U.S. federal income tax purposes (Sections 351 and 368(a) of the Code).

Sentiment

Score: 7

Explanation: The filing details a significant corporate simplification and restructuring, which is generally positive for long-term clarity and governance. The agreements with major stakeholders (ICE, CEO) indicate alignment. However, the acceleration of TRA payments represents a financial obligation, albeit a planned one, and the dilution from previous share issuances is noted. The 'expected' nature of the event prevents a higher score, as it's not an unexpected positive catalyst.

Positives

• The reorganization aims to simplify the corporate structure by eliminating the complex Up-C structure, which can lead to improved transparency and operational efficiency.
• The transactions are intended to qualify for nonrecognition tax treatment for U.S. federal income tax purposes, potentially minimizing immediate tax liabilities for the company and contributors.
• The Up-C Collapse and related agreements have been approved by all disinterested members of the audit committee and a majority of disinterested members of the board of directors, indicating robust corporate governance and alignment with stakeholder interests.

Negatives

• The Up-C Collapse triggers an acceleration of all obligations under the Tax Receivable Agreement, which could result in significant cash outflows.
• The Early Termination Payment for Majority TRA Parties (Intercontinental Exchange Holdings, Inc. and Akshay Sudhir Naheta) is capped, potentially limiting their full entitlement under the original TRA terms.
• The Schedule 13D filing notes dilution caused by the Issuer's issuance of additional shares of its Class A Common Stock since the previous amendment, impacting existing shareholders' proportional ownership.

Risks

• The Up-C Collapse may not be consummated for any reason, in which case the TRA Amendment and the Up-C Collapse Waiver would not become effective, and the existing corporate structure would remain.
• The intended nonrecognition tax treatment for the Up-C Collapse and the Contributions under Sections 351 and 368(a) of the U.S. Internal Revenue Code may not be achieved, potentially leading to unexpected tax liabilities.
• The Up-C Collapse Waiver, which prevents Intercontinental Exchange Holdings, Inc. from transferring its warrants, will terminate if the Up-C Collapse is not consummated on or before November 14, 2025.

Future Outlook

The company plans to complete the Up-C Collapse reorganization, which will simplify its corporate structure by transitioning to a single class of common stock under a new holding company. This move is expected to streamline operations and potentially improve investor clarity. The related agreements are contingent on the consummation of this reorganization, with a deadline of November 14, 2025, for certain waivers to remain effective.

Management Comments

• "All of the participating members of the audit committee of the board of directors of the Corporate Taxpayer, which are disinterested, have approved the Up-C Collapse and the transactions contemplated thereby, including this Amendment, in accordance with the Corporate Taxpayers related person transactions policy."
• "A majority of the disinterested members of the board of directors of the Corporate Taxpayer has approved the Up-C Collapse and the transactions contemplated thereby, including this Amendment."
• "The Corporate Taxpayer and the Contributors intend that for U.S. federal income tax purposes the Up-C Collapse and the Contributions will qualify as a nonrecognition transaction under Section 351 of the U.S. Internal Revenue Code of 1986, as amended (the Code)."

Industry Context

The elimination of an Up-C structure is a common corporate simplification strategy, often undertaken by companies that initially went public via a SPAC merger or had complex pre-IPO structures. This move typically aims to improve transparency, reduce administrative complexity, and potentially enhance valuation by aligning with more traditional corporate structures. It can also be a precursor to further strategic actions or a way to make the company more attractive to a broader investor base.

Comparison to Industry Standards

• The elimination of the Up-C structure aligns with a trend among companies to simplify their corporate governance and capital structures, which is generally viewed positively by institutional investors who prefer straightforward equity ownership.
• The 18% Early Termination Rate for the Tax Receivable Agreement is a specific contractual term. Its favorability depends on prevailing market discount rates and the expected tax benefits. Without comparable TRA rates from similar companies, a direct industry benchmark is difficult, but it represents a fixed cost for the accelerated payment.
• The use of NYSE Rule 312.04(h) 'Minimum Price' ($39.34) for share issuance in the contribution agreement indicates adherence to exchange rules for related-party transactions, ensuring a floor price for the shares issued.

Corporate Governance

Related Party Transactions

• Amendment to the Tax Receivable Agreement (TRA Amendment) between Bakkt Holdings, Inc., Intercontinental Exchange Holdings, Inc. (ICE), and Akshay Sudhir Naheta.
• Contribution Agreement between Bakkt Holdings, Inc., Intercontinental Exchange Holdings, Inc. (ICE), and Akshay Sudhir Naheta, involving the contribution of TRA rights and exchange for NewCo Class A Common Stock.
• Waiver, Acknowledgment and Consent between Bakkt Holdings, Inc. and Intercontinental Exchange Holdings, Inc. (ICEH) regarding warrants.
• Jeffrey C. Sprecher, Director (Chairman) and Chief Executive Officer of Intercontinental Exchange, Inc., may be deemed to beneficially own shares through his spouse's holdings in Bakkt Management, though beneficial ownership is disclaimed by the Reporting Persons.

Stakeholder Impact

• Shareholders: Existing Class A and Class V shareholders will receive equivalent shares in NewCo. Holders of Bakkt Opco Common Units coupled with NewCo Class V shares will receive NewCo Class A shares, simplifying their ownership structure. The overall corporate simplification may enhance long-term shareholder value and clarity.
• Intercontinental Exchange Holdings, Inc. (ICEH): As a major shareholder and TRA party, ICEH is central to the reorganization, agreeing to amendments and contributions that streamline its relationship with Bakkt/NewCo. It will receive NewCo Class A shares and equivalent warrants.
• Akshay Sudhir Naheta (CEO): As a TRA party, he is involved in the contribution agreement, receiving NewCo Class A shares in exchange for TRA rights, aligning his interests with the new corporate structure.
• Regulatory Authorities (SEC, NYSE): The reorganization and related filings ensure compliance with regulatory disclosure requirements for significant corporate events and changes in beneficial ownership.

Next Steps

• Consummation of the Up-C Collapse reorganization.
• Effectiveness of the TRA Amendment and Contribution Agreement immediately prior to the Up-C Collapse.
• Issuance of equivalent warrants in NewCo to Intercontinental Exchange Holdings, Inc. upon consummation of the Up-C Collapse.
• Preparation and filing of tax returns consistent with the intended nonrecognition tax treatment for the transactions.

Key Dates

Recommendation

The planned Up-C Collapse is a strategic move to simplify Bakkt's corporate structure, which can lead to improved transparency and potentially better valuations in the long run. The involvement and approval of major stakeholders like Intercontinental Exchange and the CEO, along with the intended tax-efficient structure, are positive indicators. However, the immediate financial impact of accelerated TRA payments and the specifics of the new entity's performance post-reorganization are still unfolding. Investors should hold to observe the successful consummation of the collapse and the subsequent operational and financial performance of the new holding company before making further investment decisions.

Keywords

Bakkt Holdings, Up-C Collapse, Tax Receivable Agreement, TRA Amendment, Intercontinental Exchange, Corporate Reorganization, SEC Filing, Schedule 13D, Warrants, Corporate Governance, Financial Restructuring, NewCo