Author: Steven Ehrlich
Translated by: TechFlow
Ripple completed a $500 million funding round at a $40 billions valuation, but it already owns $80 billions worth of XRP.
Ripple Labs recently announced the completion of a $500 million funding round, with investors including well-known institutions such as Brevan Howard, an affiliate of Citadel Securities, and Marshall Wace. In addition, prominent crypto investment firms Galaxy and Pantera also participated in this round.
However, what exactly did investors buy with this $500 million?
Recently, Ripple itself has been actively acquiring other companies. In the past few months, Ripple acquired the custody platform Palisade, the $1.25 billions prime broker Hidden Road, and the stablecoin infrastructure platform Rail. In addition, Ripple launched its own stablecoin RLUSD, which now has a market cap exceeding $1 billions. Meanwhile, Ripple's XRP token is expected to see the launch of the first US spot ETF (Exchange-Traded Fund) next week, and the company plans to apply for a national banking license from the Office of the Comptroller of the Currency.
Despite Ripple's rapid recent development, it seems difficult to find a reasonable basis for its $40 billions valuation. Especially considering that the XRP Ledger generates less than $200,000 in monthly revenue from transaction fees. So, what is the logic behind this?
According to several investors and venture capitalists who requested anonymity, as reported by Unchained, this funding round was more about purchasing Ripple's XRP holdings, possibly at a significant discount to the spot price.
“[This company] is nothing but its XRP holdings. No one uses their technology, and no one generates usage on their network or blockchain.” stated a well-known venture capitalist bluntly.
Another investor added, “Ripple's equity itself may not be worth much, let alone reaching a $40 billions valuation.”
XRP Wealth
Although Ripple Labs may not be the highest-valued company in the crypto industry, it is perhaps one of the wealthiest. At the inception of the company and blockchain, as part of its early distribution strategy, Ripple Labs was allocated 80 billions out of the total 100 billions XRP supply, which are released quarterly through escrow accounts.
As of now, Ripple Labs still holds 3.476 billions XRP tokens, releasing 1 billion each month. Typically, 60%-70% of these tokens are re-locked, with the remainder used to cover operational expenses. At the current price of $2.32 per XRP, these tokens have a nominal value as high as $8.063 billions.
Private XRP Digital Asset Treasury (DAT)?
If this investment is viewed as an investment in Ripple's Digital Asset Treasury (DAT), then the deal seems quite attractive for investors. After all, investing at a $40 billions valuation in a company that already has $80 billions in assets on its platform is equivalent to buying at a 50% discount, with an mNAV (multiple of net asset value) of just 0.5. Generally, DAT investment proposals have an mNAV close to 0.7 or 0.8.
But things are not that simple. Even if Ripple were willing and able to sell all its XRP on the spot market today, it would be nearly impossible to approach an $80 billions valuation. However, even if these holdings are discounted by 50%—a figure one investor not involved in this round considers reasonable—it still means investors are buying in at an mNAV of 1, while also enjoying the potential upside from Ripple's recent moves and acquisitions.
All investors participating in this round declined to respond to Unchained's inquiries about the investment, especially regarding the role of Ripple's XRP holdings in the decision-making and pricing process. Ripple also did not respond prior to publication.
However, a source familiar with one of the participating parties revealed that these companies have had business dealings for years. Especially in the payments sector—with the passage of the GENIUS Act in July and growing market attention on stablecoins, payments are a hot area—investors need to bet on multiple “horses” in this “race.”
Additionally, this source hinted at Ripple's massive treasury reserves, admitting, “Even if they can't build a successful business themselves, they can simply buy one outright.”
Ripple's Calculation: What's the Deeper Meaning Behind the Fundraising?
Although Ripple did not respond to requests for comment, a former employee pointed out that this round of funding brings multiple benefits to the company. First, it solidifies Ripple's $4 billions valuation for company shares traded on platforms like Carta. The person mentioned that the company may have already spent over $1 billions buying back shares from early investors and employees.
In addition, this funding provides the company with extra capital for further acquisitions, without having to raise funds by selling XRP—thus avoiding the risk of triggering market panic.
Ironically, the most well-capitalized company in the crypto space may actually be facing a cash shortage.
