Ripple CTO Explains Reason for Massive Buyback

Ripple CTO David Schwartz weighed in on a discussion on X as regards a planned buyback by Ripple.

Days ago, reports surfaced that Ripple would be buying back $285 million worth of shares in the company from early investors and employees.

There isn’t really a liquid market. The market for equity in privately-held companies is largely illiquid.

— David “JoelKatz” Schwartz (@JoelKatz) January 11, 2024

The investment, known as a tender offer, valued the company at $11.3 billion. Investors are only permitted to sell up to 6% of their ownership, Reuters cited from anonymous sources. The planned buyback will cost $500 million to cover the cost of converting restricted stock units into shares and taxes

In the days ahead, Ripple aims to conduct more share buybacks regularly to give liquidity to investors, and it has no plans to go public in the United States anytime soon due to regulatory uncertainty.

The planned buyback as well as the fact that Ripple has chosen not to conduct an IPO have sparked a lengthy Twitter debate. Ex-Ripple developer Matt Hamilton wonders if there would be any benefit to Ripple if it conducted an IPO.

Hamilton feels it would make no functional difference because most companies raise funds through IPOs. He also believes that Ripple does not need to raise funds.

Ripple CEO Brad Garlinghouse revealed that the company had over $1 billion in cash and over $25 billion in crypto, predominantly XRP coins, on its financial sheet.

Ripple CTO David Schwartz entered the discussion on X over the buyback, stating that employees care that their stock options have a path to liquidity. As a result, there is no reason why it has to be publicly traded shares in particular.

Responding to a user’s question on why Ripple is buying back the shares if there is such a liquid market, Schwartz responded in the negative, saying there is not “really” a liquid market. He stated that the market for equity in privately held companies is largely illiquid.

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