Introduction
This is the due diligence that I have done on Bakkt ($BKKT).
The first half will read more like an essay and is speculative in nature.
Or, you can skip to the second half where I discuss it's technical prospects as a possible short/gamma squeeze.
I have tried to remove bias from my argument in the ways that I am able to.
If this DD interests you, and in the course of your own due diligence you ask yourself, 'Who is u/PaledOchre? What are his biases?' you will probably notice a DD that I had written with the intent to post on WallStreetBets.
As such, I wrote it to communicate in a way that was consistent with WSB culture and would appeal to a broad base of peoples, and it is not a representation of my whole understanding or opinions.
Timing, Retail Sentiment, and a Note On 'Memes'
First, a few thoughts. I can't help but to think about the GME craze. In January of 2021, it was easy to think of GME as a singular event.
Since then, we have learned that retail has an impressive ability to move prices on a whim. Some traders have built playbooks on how to profit off memes. Finding and front-running sympathy plays has proven to be effective. For every GME, there is an AMC.
Memes are an efficient method of communicating complex and interconnected ideas. Memes rely on humor, heuristics, analogy, and other reductive techniques to simplify information and present it in a packaged, appealing manner. You may be familiar with the origins of the term 'meme'.
Memes are not propelled by stocks with good technicals, but rather stocks with good technicals are propelled by memes.
In the recently released GameStop SEC report, it is noted that the Jan 28th "squeeze" was mostly momentum from retail traders and long funds, and that short covering only represented a small percentage of the upward movement (Sections 3.1 and 3.4).
After the DWAC spike, there were a number of copycat plays. BENE, MAQC, PHUN; these plays offered nothing but a tenuous a connection to DWAC and SPAC status. The market adapts it's strategies; someone wanted to front-run the sympathy spikes.
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BKKT is in a unique position to gain traction as a sympathy play to DWAC.
Kelly Loeffler (former Senator(R-GA), former Bakkt CEO), her husband Jeffrey Sprecher (CEO of ICE, NYSE Chairman) and InterContinental Exchange (parent company of Bakkt, owns the NYSE) are heavily invested in Bakkt.
Both Loeffler and Sprecher have long track records of supporting Trump, and being supported by Trump. These are public figures. There is no question as to who they are or where their alliances lay.
After DWAC, there has been a noticeable increase in highly-partisan rhetoric on WSB, StockTwits, Twitter etc. I'm sure you've seen at least a couple 'Let's Go Brandon's.
It is nearly impossible to discuss this stock without getting sucked into one side of the debate or the other.
This is a feature, not a bug. There's no such thing as bad press. The more people discuss this stock, the more conversations devolve into arguments. The more arguments, the more engagement, the more people see the ticker, the more people discuss the stock. A feedback loop of sorts
BKKT ran 14% on Friday into close.
As I've been watching it over the weekend, mentions and chatter have been steadily increasing. It was on StockTwits 'most new watchers' list until recently getting pushed off.
Although I would have preferred to get in at $8, I think the timing is near perfect as the weekend has allowed information to disseminate. Anyone who has been looking for a DWAC related play will almost have certainly seen BKKT.
Technical Set-up
Overview of Bakkt
Bakkt is a digital assets trading platform. They have partnered with GooglePay to allow users to trade/sell, pay with, and convert cryptocurrencies, as well as other digital assets. They are one of a handful of brokers that are cleared to deal in Crypto Futures, as a perk of their parent company, ICE.
They have just recently gone public via SPAC.
Stats
- Small cap - Under 500m market cap
- High Short Interest - 7m shares short (via Ortex)
- High Cost to Borrow and Utilization - Average CtB at 30% with a high of 300% (via Ortex)
- **Five Days to Cover -** (via Ortex)
- Unknown Redemption Rate - As of writing, we don't know what the redemption rate was on de-SPAC (afaik)
- High Institutional Ownership - 66% Institutional Ownership with 21m shares outstanding according to NASDAQ on 9/30
- Low Float - That would leave 7m shares floating. I must be doing something wrong, because that seems too good to be true.
- Large OI on the Options Chain - Pictured below. Possible gamma ramp?
- No S-1 - My understanding being that until S-1 is filed, PIPE shares are locked.
Pulled from Schwab. Note the 10, 12.5, and 15 strikes.
Possible Catalysts
- Weekend Run-up Continues - and Market Makers begin to hedge delta.
- Meme Propagation - Regardless of of the veracity of any of this information, if it catches on and goes viral, it will pump. A 'tail wagging it's dog'-type situation.
- BTC goes for a run - As a crypto platform, they hold and trade Bitcoin and other crypto. Asset value appreciation could cause shorts to get uncomfortable.
- Trump Acknowledgment - If Trump or TMTG so much as nod in BKKT's direction, it will pump despite anything else.
Bear Counter-Argument
Any of this information could have been misinterpreted by myself. Even if it's all true and valid, for whatever reason, it may not take hold and nobody ever notices it.
BTC crash could cause a sell-off. Especially if there are a bunch of unsuspecting pump and dumpers who are looking to buy in.
DWAC could crater. A catastrophic return to Earth could stymie sympathy plays, for the moment.
Trump could disavow Loeffler, for some reason. I would not be surprised. Fickle is the man.
It's already run as much as it's going to. This seems unlikely, but IV% on options is already over 150.
The Market could crash. There are a lot of general market concerns. An overly large drop could take the news cycle away from DWAC.
Summary
For me, this one ticks all the boxes. It hits all the buzzwords; short squeeze, SPAC, gamma ramp, crypto, Trump. Anything could happen, but I have placed a sizable bet on BKKT.
If you want leverage, warrants may be better than options because of the high IV.
