Chief Technology Officer at Ripple David Schwartz provided his insights on a discussion regarding a proposed buyback by Ripple.
Recently, reports indicated that Ripple had decided to repurchase shares worth $285 million from its early shareholders and workers.
Unfortunately, a liquid market is not readily available. A lack of liquidity predominantly characterizes the marketplace for equity in privately held firms.
— David “JoelKatz” Schwartz
A valuation of $11.3 billion was assigned to the company as a result of the investment, which is known as an offer to tender offering. There is a limited allowance for investors to sell up to a maximum of six percent of their ownership, according to persons with access to confidential information.
For the purpose of covering the costs associated with converting the units of restricted stock into shares and paying the taxes that are required, the planned buyback will necessitate a substantial investment of $500 million.
The Company Has Taken Care of the Interests of Its Investors
Over the next few days, Ripple has made a firm commitment to carry out additional share buybacks on a consistent basis, which will provide its valued investors with a sufficient amount of liquidity.
In addition, the company does not intend to conduct a public offering in the United States in the near future. This is primarily due to the regulatory uncertainty that is currently present in the market.
A substantial amount of conversation has been sparked on Twitter as a result of the proposed repurchase, as well as Ripple’s decision to forego an initial public offering. A former developer at Ripple named Matt Hamilton is currently pondering the potential benefits that an initial public offering (IPO) could bring to the cryptocurrency company.
Due to the fact that the majority of businesses raise capital through initial public offerings (IPOs), Hamilton is of the opinion that it would not have any practical impact. Furthermore, he is of the opinion that Ripple does not require any additional capital to operate.
The chief executive officer of Ripple, Brad Garlinghouse, disclosed on the company’s financial statement that the company had more than one billion dollars in cash and more than twenty-five billion dollars in cryptocurrency, the majority of which consisted of XRP coins.
Employees Will Have the Opportunity to Convert Their Stock Options Into Cash
In the course of the discussion concerning X’s buyback, Ripple’s Chief Technology Officer David Schwartz participated and emphasized the significance of providing employees with the opportunity to convert their stock options into cash. In light of this, there is no justification for specifically having shares that are traded on public traded markets.
Schwartz offered a different point of view in response to a user’s inquiry regarding Ripple’s decision to buy back shares despite the presence of a market that, at first glance, appears to be liquid. He suggested that the market might not be as fluid as it seems to be. According to his assertion, the demand for equity in privately owned businesses is characterized by a high degree of illiquidity.
