Ripple Labs has made a significant move by acquiring $285 million worth of shares from early investors and employees, according to two informed sources who spoke to Reuters. This strategic investment, referred to as a tender offer, has set the company’s valuation at a remarkable $11.3 billion.
Information from Crunchbase indicates that since 2015, Ripple has accumulated $293.8 million in funding across 14 rounds. Anonymous sources revealed that investors are limited to selling a maximum of 6% of their stake.
Ripple, a privately-held entity, confirmed the tender offer and stated its plan to allocate $500 million for the planned buyback. This amount is intended to enable the conversion of restricted stock units into shares and cover related taxes.
Ripple Prefers Buybacks Over An IPO
CEO Brad Garlinghouse described the company’s current financial position, stating that Ripple now holds over $1 billion in cash and over $25 billion worth of crypto, predominantly in XRP coins, on its balance sheet. He added that regular share buybacks are expected to provide liquidity for investors. However, he emphasized that an IPO in the US is not planned in the near future due to the prevailing “regulatory uncertainties.”
The backdrop to this development is Ripple’s partial victory in its lengthy legal battle with the US Securities and Exchange Commission (SEC). A District Judge ruled that XRP’s sales on public exchanges did not constitute unregistered securities offerings. However, the judge also noted that the institutional sales did qualify as securities offerings.
The SEC’s interlocutory appeal request was rejected last October. Furthermore, the SEC also dropped charges against Garlinghouse and the executive chairman, who were accused of aiding securities laws violations regarding XRP sales.
Highlighting the company’s financial strength, Ripple recently acquired Switzerland-based crypto custody firm Metaco for $250 million, despite ongoing legal disputes with the SEC. Garlinghouse commented, “Growing in the headwinds of the SEC lawsuit was certainly a challenge, but 95% of our customers are non-US financial institutions.” However, he did not disclose the size of the payment business.
Notably, this is not Ripple’s first foray into share buybacks. In early January 2022, it repurchased shares issued after securing $200 million in 2019 funding. This earlier buyback, which valued the company at $15 billion, marked a significant increase from the $10 billion valuation at the time of the funding round.
Rumors of a Ripple IPO have been circulating for some time, but experts suggest that the unfavorable macro situation and the legal dispute with the SEC have been deterrent factors. For now, Ripple seems to prefer share buybacks to offer early investors an alternative exit route for cashing out their investments.
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