Ripple has bought back shares it issued after securing $200 million in funding in 2019, an unusual move which CEO Brad Garlinghouse said underlined the crypto company’s momentum despite its ongoing legal battle with the SEC.
Ripple secured series C funding led by Tetragon, with investments from SBI Holdings and Route 66 Ventures, at a $10 billion valuation in late 2019. Ripple is reacquiring the equity shares at a $15 billion valuation, which suggests the investors made a 50% profit in just over two years. The company did not confirm the details of the transaction beyond the company valuation.
Tetragon and Route 66 Ventures could not immediately be reached for comment, and SBI Holdings declined to comment. Share buybacks are uncommon but not unheard of among venture-backed companies. "Typically, they are a very inefficient use of capital" for startups, Redpoint partner Tomasz Tunguz wrote in 2019.
“Despite these crazy headwinds with the SEC and frankly losing some customers because of the SEC lawsuit, we grew very quickly,” Garlinghouse told Protocol. “Ripple’s business has materially grown. We have a strong balance sheet. Even after doing this repurchase, we have over a billion dollars in cash. We're starting 2022 in a great position of strength.”
Ripple is engaged in a legal brawl with the SEC, which sued the company in December 2020. The regulatory agency accused Ripple of raising $1.3 billion in unregistered digital-asset securities by issuing XRP tokens. The SEC's key claim is that XRP is not a currency, but a security, and therefore subject to strict securities laws.
The lawsuit caused the value of XRP to drop dramatically, although it is still the 8th largest cryptocurrency based on value with a market cap of $29 billion. XRP has fallen sharply along with other cryptocurrencies in the recent market rout which has wiped out more than $1 trillion in value.