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The investor group secured a put option that allows them to return their shares to Ripple after three or four years with a 10% annual return unless an IPO is completed by that point.
Key Takeaways
- Ripple completed a $500 million share sale with profit-guaranteeing terms for some investors.
- Ripple’s valuation is closely tied to its large XRP holdings, but the company is expanding into other financial services.
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Ripple’s latest fundraise at a $40 billion valuation drew elite investors, but the terms reveal great caution about the risks in the crypto sector, Bloomberg said Monday.
As reported, investors have negotiated a set of terms that allow them to sell their shares back to Ripple after three or four years at a higher predetermined price, effectively guaranteeing profits unless the company goes public before that point.
If Ripple chooses to repurchase the shares instead, it would be required to pay an annualized return of 25%.
Citadel Securities and other major funds such as Fortress Investment Group, Marshall Wace, Brevan Howard, Galaxy Digital, and Pantera participated in the financing round with these profit-protection provisions.
Many investors believe Ripple’s value is anchored almost entirely to XRP, which the company held at $124 billion as of July. The coin has dropped considerably during the latest crypto market downturn. These conditions could create major financial obligations for Ripple in the future as it works to reduce its dependence on a single token.
