Ripple Labs is going through a tender offer to give early investors an exit route rather than a public offering. The transaction is expected to place the company’s valuation at $11.3 billion.
Ripple Labs is planning a tender offer to buy back a $285 million stake in the company from early investors and employees, according to a Reuters report citing sources familiar with the matter.
A Ripple spokesperson confirmed the transaction to Cointelegraph. Ripple plans to spend a total of $500 million in the process. The budget includes the cost of converting restricted stock units to common shares.
According to Reuters, investors will only be able to sell 6% of their holdings. The transaction would place the company’s valuation at $11.3 billion. As per Ripple’s profile on Crunchbase, it has raised a total of $293.8 million in funding over 14 rounds since 2015.
The company now holds more than $25 billion worth of crypto, mainly XRP (XRP), and has over $1 billion in cash on its balance sheet, said CEO Brad Garlinghouse.
Additional buybacks are anticipated as Ripple aims to provide an exit for early investors. According to Garlinghouse, the company has no plans to go public anytime soon in the United States, where it is based, due to the country’s uncertain regulatory environment.
— Reuters (@Reuters) January 10, 2024
Ripple’s buyback strategy offers an alternative exit route for early investors, diverging from the more traditional path of going public. In other words, the approach will allow investors to cash out their investments instead of going to the typical liquidity event known as initial public offering (IPO).
By choosing a buyback over an IPO, Ripple retains greater control and flexibility of its business. In a public offering, the company would have to deal with additional regulatory requirements, market volatility, and managing investor expectations. A buyback, on the other hand, enables Ripple to manage its investor relations without the complexities that come with being a publicly traded firm.
“Growing in the headwinds of the SEC lawsuit was certainly a challenge, but 95% of our customers are non-US financial institutions,” Garlinghouse told Reuters.
Ripple Labs is the technology company behind the Ripple payment protocol and the XRP token. The company has been embroiled in a lawsuit with the U.S. Securities and Exchange Commission (SEC) since December 2020, alleging that it conducted an unregistered securities offering through the sale of XRP.
The case saw a significant turning point in July 2023, when Judge Analisa Torres partially ruled in favor of the company by saying that XRP is not a security in relation to its programmatic sales on exchanges. However, the court found that XRP was a security when sold to institutional investors via funding rounds.
According to Cointelegraph’s market data, XRP trades at $0.56 at the time of writing, with a market capitalization of $30.7 billion.