Crypto company Ripple Labs has initiated a substantial share repurchase, amounting to $285 million, from early employees and investors, according to reliable sources acquainted with the situation. The financial maneuver, commonly referred to as a tender offer, has placed Ripple’s overall valuation at an impressive $11.4 billion.
The privately held entity confirmed that it will set aside $500 million for the all-inclusive buyback, which will include changing restricted stock into shares in addition to paying related taxes. Investors are limited to selling only 6% of their stake in this process.
Brad Garlinghouse, Ripple’s CEO, stated that the company intends to conduct periodic share buybacks to enhance liquidity for investors. Furthermore, Garlinghouse clarified that the company currently has no intentions to go public in the United States due to regulatory uncertainties. According to Garlinghouse, Ripple is in a strong financial position, having more than a billion dollars in cash plus a cryptocurrency portfolio in excess of $25 billion, predominantly made up of XRP coins.
The buyback strategy adopted by Ripple deviates from the conventional trajectory of going public, offering an alternative exit avenue for early investors. Unlike the typical route of an IPO, a buyback allows investors to liquidate their holdings without undergoing the complexities associated with a public offering.
By opting for a buyback, Ripple retains heightened flexibility and control over its operations. Public offerings entail navigating additional regulatory obligations, market volatility and managing investor expectations. In contrast, a buyback affords Ripple the ability to oversee investor relations without the intricacies linked to being a publicly traded company.
The move comes on the heels of a legal victory for Ripple in its prolonged legal dispute with the U.S. Securities and Exchange Commission (SEC). Last year, a court ruled that sales of XRP on exchanges didn’t constitute offerings of unregistered securities. Additionally, charges against Garlinghouse and former Ripple executive Christian Larsen were dismissed, absolving them of alleged violations related to XRP sales. Despite the SEC’s attempt at an interlocutory appeal, the request was denied in October.
Ripple Labs, which was founded in 2012, is focused on creating a system that facilitates international transactions and encourages XRP’s use. Garlinghouse acknowledged the challenges posed by the SEC lawsuit but highlighted that the majority of Ripple clients, constituting 95%, are non-U.S. financial institutions. In May of last year, the company acquired Metaco, a cryptocurrency custody company based in Switzerland, for $250 million, further increasing its global reach.
The buyback to be executed by Ripple Labs could suggest that the overall health of the crypto industry is improving after the crypto winter that posed an existential threat to it. The outlook of major actors such as Coinbase Global Inc. (NASDAQ: COIN) may therefore be more positive than it was at the peak of the headwinds, which pummeled the industry for most of 2022 and 2023.
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