Blockchain payments startup Ripple has taken a major step in its corporate strategy by announcing a tender offer to buy back a $285 million stake in the company, which will subsequently give early investors an exit route rather than going the IPO path.
According to Reuters, the new share purchase values Ripple at an impressive $11.3 billion.
Ripple Fortifies Market Standing With $285 Million Share Buyback
Ripple is preparing for a huge buyback of its shares.
As per two unidentified sources cited by Reuters in a Jan. 10 report, the San Francsico-based company is set to repurchase $285 million worth of shares from early investors and employees. The tender offer drives Ripple’s valuation to $11.3 billion.
Ripple anticipates spending a total of $500 million on the transaction, inclusive of taxes and the cost of converting restricted stock units to common shares. The anonymous sources revealed investors will only be allowed to sell up to 6% of their stake. This limitation is a strategic approach to preserving a balanced shareholder framework.
The buyback and the valuation are notable because they suggest that Ripple is feeling bullish about its prospects in 2024. The company’s chief executive officer Brad Garlinghouse clarified that the focus is on investor liquidity, with no plans to go public anytime soon in the U.S. due to the murky regulatory climate in the country. In other words, the buyback strategy enables investors to cash out their investments without the complexities that come with an initial public offering (IPO).
It’s worth noting that this ain’t Ripple’s first rodeo. In January 2022, the company announced that it had bought back the shares from the investors who financed its $200 million Series C round back in December 2019.
Ripple CEO Assures Strong Financial Position
In the meantime, Ripple’s Garlinghouse has stressed the firm’s strong financial position, with $25 billion worth of crypto, mainly XRP, and over $1 billion in cash on its balance sheet.
Ripple has shown incredible resilience and growth despite ongoing legal woes with the U.S. Securities and Exchange Commission (SEC), recently purchasing Switzerland-headquartered crypto custody startup Metaco for $250 million.
“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.
Currently, XRP is changing hands at around 60 cents and is the sixth most valuable cryptocurrency overall.