In brief
- Ripple's shares trade at a discount to its XRP holdings
- VivoPower is trying to buy them for discounted XRP exposure.
- The shares aren't owned by Ripple itself, a person familiar with the matter said.
Ripple owns billions of dollars worth of XRP, but company shares trading on private secondary markets don’t fully reflect that, according to VivoPower advisory board member Adam Traidman.
As a private company, Ripple’s shares have less liquidity than they would on a stock exchange, so the company’s share price is primarily determined across individualized deals—often at a discount to the value of Ripple’s unmatched XRP holdings—he told Decrypt on Tuesday.
“It has historically been really challenging for Ripple to keep great employees because there is no liquidity,” said Traidman, who previously served on Ripple’s board of directors and as CEO of SBI Ripple Asia, a joint venture with the Japanese financial conglomerate SBI Holdings.
Ripple shares do have liquidity on private markets like Forge. But they are limited to accredited investors. Ripple shares changed hands around $114 on Tuesday, but it can take up to 60 days for trades to be completed, depending on the negotiating process.
Decrypt reached out to Ripple for comment.
Tender offers from Ripple have also provided its current and former employees with some degree of liquidity in the past, but with digital asset treasury firms being established for nearly every popular cryptocurrency—from Dogecoin to Tron—VivoPower has recently emerged as another potential buyer, seeking Ripple equity as a way to augment its XRP-buying strategy.
On Thursday, VivoPower shares fell to around $5.26, according to Yahoo Finance. The Nasdaq-listed firm’s share price has rallied nearly 300% year-to-date; however, the company’s stock has struggled to surpass a recent high of $8.88 in late May.
The company said earlier this month that it is acquiring $100 million worth of privately held Ripple shares at a $19 billion valuation. Without considering the value of Ripple’s business or RLUSD stablecoin, VivoPower said the deal would effectively give it exposure to XRP at an 86% discount compared to the cryptocurrency’s current market price.
Ripple didn’t pay a dime for its XRP stockpile, but based on the company’s valuation, VivoPower said that it would effectively be buying XRP at $0.47 per token at the time.
Ripple-linked wallets controlled roughly 42 billion XRP on Thursday, according to XRP Scan. On paper, those tokens were worth $121 billion, according to crypto data provider CoinGecko.
XRP Ledger co-founders gifted Ripple 80 billion XRP in the network and company’s early days. Most of the remaining funds–totaling 38 billion XRP worth $112 billion, as of October–are held in escrow to “provide predictability to the XRP supply,” according to XRP Ledger’s website.
VivoPower co-founder and Executive Chairman Kevin Chin learned about the opportunity to purchase Ripple shares at a confab in Singapore in June, he told Decrypt. What followed was a nearly two-month period of due diligence, he added.
“Ripple themselves are the largest holders [of XRP], largely in escrow, and demonstrated over more than 10 years that they’re very disciplined in how that gets released into the market,” he said. “So we got very comfortable.”
A person familiar with the matter told Decrypt that the shares that VivoPower is trying to purchase are not owned by Ripple itself.
VivoPower waited until the U.S. Securities and Exchange Commission’s years-long legal battle with Ripple was over before making the deal public. The withdrawal of the SEC’s appeal, and Ripple’s cross-appeal, finalized a $125 million penalty against Ripple earlier this month.
VivoPower estimated this month that its investment in Ripple would reflect exposure to 211 million XRP. VivoPower unveiled its XRP treasury strategy in late May, pivoting away from sustainable energy, but it does not share its XRP holdings on its website.
Traidman said that VivoPower is working on a transparency page to show its XRP holdings that’s “cryptographically provable independently from the XRP ledger,” but acknowledged that may not be possible with Ripple’s shares, if the company is able to buy them.
“That's not on the blockchain, so we can't prove it. But at least on the website, we will transparently state how much we have,” he said.