Ripple CTO David Schwartz Addresses Planned $285 Million Share Buyback in Recent Discussion￼
In a recent turn of events, Ripple, the blockchain-based payment protocol, has made headlines with its plans to conduct a significant share buyback. The company’s Chief Technology Officer, David Schwartz, took to Twitter to shed light on the decision, sparking a debate on the platform and within the cryptocurrency community.
Reports surfaced just days ago, revealing Ripple’s intention to repurchase $285 million worth of shares from early investors and employees. This move, known as a tender offer, is part of Ripple’s broader strategy to provide liquidity to its investors. The valuation of the company in this transaction stood at a substantial $11.3 billion.
Schwartz, responding to the discussion on Twitter, addressed concerns about the liquidity of the market, stating, “There isn’t really a liquid market. The market for equity in privately-held companies is largely illiquid.” This statement raises questions about the perceived liquidity of privately held companies and the challenges investors face in selling their shares.
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
Anonymous sources cited by Reuters revealed that investors will only be allowed to sell up to 6% of their ownership in this buyback. Additionally, the planned repurchase will come at a cost of $500 million, covering the expenses related to converting restricted stock units into shares and addressing tax considerations.
Looking ahead, Ripple aims to make share buybacks a regular occurrence, further emphasizing its commitment to providing liquidity to its investor base. Notably, the company has also disclosed that it has no immediate plans to go public in the United States, citing regulatory uncertainties as a key factor in this decision.
The announcement of the share buyback and Ripple’s decision to refrain from conducting an initial public offering (IPO) have triggered a lengthy debate on Twitter. Former Ripple developer Matt Hamilton has publicly questioned the potential benefits of an IPO for Ripple, adding an extra layer to the ongoing discussion.
Responding to a user’s inquiry on the necessity of the share buyback, given the perceived liquidity in the market, Schwartz maintained a negative stance. According to him, there is not “really” a liquid market, particularly when it comes to equity in privately held companies. This assertion adds context to Ripple’s strategic move and highlights the challenges associated with trading shares in such entities.
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