In a strategic move to fortify its financial standing and provide liquidity for investors, Ripple Labs, the prominent cryptocurrency company behind the XRP cryptocurrency, has initiated a substantial share buyback program amounting to $285 million.
Citing sources familiar with the matter, Reuters reported on Wednesday that this investment often termed a tender offer, propelled Ripple’s valuation to an impressive $11.3 billion. For context purposes, share buybacks occur when a company buys its stock, signalling confidence in its business. This move can increase the value of each share, benefiting investors. It’s also a tax-friendly method to give money back to shareholders.
Sources further disclosed that the buyback plan allows early investors and employees to sell up to 6% of their stake in the privately held company. In a letter to Reuters, Ripple Labs confirmed the authenticity of the tender offer, asserting its commitment to spending $500 million on the comprehensive buyback initiative. The allocated funds will cover expenses associated with converting restricted stock units into shares and addressing tax obligations.
Brad Garlinghouse, the Chief Executive at Ripple, articulated the company’s intention to conduct regular share buybacks to enhance liquidity for investors. Contrary to speculation, Garlinghouse emphasized that Ripple has no immediate plans to go public in the United States, citing regulatory uncertainties.
“Growing in the headwinds of the SEC lawsuit was certainly a challenge, but 95% of our customers are non-US financial institutions,” said Garlinghouse.
He further revealed that the company currently holds an impressive financial position, with over $1 billion in cash reserves and digital assets exceeding $25 billion, primarily in the form of XRP coins.
The decision to undertake the share buyback program follows Ripple’s recent legal victory against the U.S. Securities and Exchange Commission (SEC). In a landmark ruling last July, U.S. District Judge Anarlisa Torres found that sales of XRP on public exchanges did not constitute unregistered securities offerings. This triumph marked a significant milestone in Ripple’s prolonged legal battle, providing a positive backdrop for the company’s financial moves.
Interestingly, the decision to buy back Ripple shares also coincides with the SEC approving 11 spot Bitcoin ETFs, signalling growing global acceptance of crypto. This move also has the potential to boost cryptocurrency companies. Mr. Garlinghouse emphasized this in a tweet Thursday, stating, “Today’s news further legitimizes crypto as an asset class, potentially catalyzing institutional investment and adoption. Ideally, this shift will steer the industry towards real-world use cases, reinforcing its legitimacy beyond speculation.”