Ripple Labs has made a significant move by buying back $285 million worth of shares from early investors and employees, as per two informed sources who spoke to Reuters. This strategic investment, which is a tender offer, has set the company’s valuation at a staggering $11.3 billion.
Crunchbase’s data reveals that since 2015, Ripple has amassed $293.8 million in funding across 14 rounds. Intriguingly, investors are capped at selling a maximum of 6% of their stake, shared the anonymous sources.
Ripple, a privately-held entity, confirmed the tender offer, elucidating its plan to earmark $500 million for the planned buyback. This amount is intended to facilitate the conversion of restricted stock units into shares, alongside covering related taxes.
Ripple Prefers Buybacks Over An IPO
CEO Brad Garlinghouse delineated the firm’s current financial standing, revealing that Ripple now holds over $1 billion cash and over $25 billion worth of crypto, predominantly in XRP coins, on its balance sheet. He added that regular share buybacks are anticipated to provide liquidity for investors. However, he emphasized that an IPO in the US is not on the cards soon due to the prevailing “regulatory uncertainties.”
The backdrop to this development is Ripple’s partial triumph in its protracted 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 observed that the institutional sales did qualify as securities offerings.
The SEC’s interlocutory appeal request was declined last October. Moreover, the SEC also withdrew charges against Garlinghouse and executive chairman, who were accused of abetting securities laws violations concerning XRP sales.
Underscoring the financial strength of the company, Ripple recently acquired Switzerland-based crypto custody firm Metaco for $250 million, despite ongoing legal tussles with the SEC. Garlinghouse remarked, “Growing in the headwinds of the SEC lawsuit was certainly a challenge, but 95% of our customers are non-US financial institutions.” He, however, did not disclose the payment business’s size.
Remarkably, this isn’t Ripple’s maiden venture 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 notable increase from the $10 billion valuation at the funding round’s time.
Rumors regarding 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 deterring factors. For the moment, Ripple seems to prefer share buy backs to offer early investors an alternative exit route, who want to cash out their investments.
At press time, XRP traded at $0.59013.
Featured image from Shutterstock, chart from TradingView.com