Cryptocurrencies have attracted a lot of attention lately, and the interest has gone far beyond bitcoin. Many competing coins have been making a name of their own on the crypto market, and some of their gains are quite impressive.
One of these remarkable contenders last year was Ripple (XRP- USD), a cryptocurrency that briefly dethroned Ethereum from its number 2 position before falling back at the beginning of 2018.Unlike bitcoin, Ripple is backed up by a company, Ripple Labs, that has been crucial in the development of the open-source payment network.
Many investors that are interested in blockchain technologies but are wary of cryptocurrency trading are looking for investment opportunities with companies that back up tokens like ripple, and that has prompted many to speculate that Ripple Labs could start an initial public offering this year. In the following article we will analyze if Ripple is a good IPO candidate for the coming year.
Ripple IPO Wanted by Insiders
During its short history, Ripple Labs has garnered a lot of interest from high-profile investors. After its 2012 founding, Ripple Labs did a private placement in which it raised over $2 million in a seed round of funding in April 2013. In this seed round prominent investors such as Andreessen Horowitz, Lightspeed Venture Partners, and a fund managed by Peter Thiel’s Founders Fund participated.
Following funding rounds attracted even more investors. Among those investors were Google Ventures and IDG Capital Partners. By late 2014, Ripple Labs had announced a $32 million deal for future funding, that issued common stock to existing investors and that put a $100 million valuation on the business. The deal closed at the end of 2015, with 28 investors participating, among them being CME Group, Seagate Technology, and a fund associated with Banco Santander’s U.K. unit.
The funding round in 2016 brought in $55 million. The aforementioned companies and others participated in the series B round, Ripple Labs saying it would use the earnings to speed customer growth, pursue strategic growth, and expand its team at an international level.
The current stakes of these companies have not been made public. However, venture capitalists are always seeking for opportunities to make profits. Going public is a long established method through which early investors can cash out, although there has been a tendency lately to postpone IPOs into the development of a new rising company to maximize the amount of pre-IPO gains for ground-floor investors.
Ripple Labs’ Opinion on the matter
Ripple Labs CEO Brad Garlinghouse has stated in a 2017 interview on CNBC what pros and cons a Ripple IPO might have:“I want to make sure we have the right managerial maturity, infrastructure, and ability to forecast properly. … At some point it will make sense. Just not today.”
How much more progress would Garlinghouse and other executives need before considering an IPO isn’t completely clear. Still, potential investors would like a better understanding of the business case of Ripple Labs as a separate entity from the token’s success (XRP- USD). Today, many crypto investors attribute almost all of Ripple Labs’ value to the ripple currency it owns. To prove an IPO would be possible, Ripple Labs would need to show that it is capable of making profit from more than just ripple’s price gains.
Why hasn’t there been a Ripple IPO by now?
Not considering the potential desire of current investors to keep their full stakes in Ripple Labs, there is another issue that could hinder an IPO. The company is momentarily involved in litigation with a consortium of banks known as R3. According to court filing, R3 and Ripple Labs made a deal in which R3 had the option to purchase 5 billion ripple at a price of less than $0.01 per XRP. Taken into consideration the cryptocurrency’s value, that option ads up an excess of $10 billion.
Both parties are engaged in a heated legal battle. Seeing that the option covers 5% of the total supply of existing ripple, this might prompt company officials to feel wary of going public until the two litigants can sort out their legal matters.
Ripple: a cryptocurrency to watch closely
Ripple’s low price and use makes it a very desirable cryptocurrency. But for now at least, it seems too early for Ripple Labs to look for an IPO to cash in on ripple’s current popularity. Having so much potential for future development, it is possible that Ripple Labs investors are keeping at bay any moves toward going public until ripple becomes a competent player in the crypto scene and in the mainstream investment community.