In early November, key Wall Street players decided to invest $500 million in the Ripple project. This amount will enable the company to surpass a $40 billion valuation, while imposing very strict safeguards to secure their investment.
Ripple: an investment with crypto safeguards
Since its launch in 2012, Ripple has displayed ambitions clearly focused on the banking sector and traditional finance. A strategy that is currently paying off, particularly since the U.S. SEC dropped its charges related to the management of the XRP cryptocurrency.
A decision that quickly caught the attention of certain key Wall Street players, such as Citadel Securities and Fortress Investment Group, to the point of motivating them to invest $500 million in this crypto company in early November.
This was a golden opportunity for Ripple to secure the support of leading financial players, even though its president, Monica Long, was quick to point out that the company did not actually need these funds to continue its record expansion through 2025.
An official showcase that has just revealed its inner workings, in a Bloomberg article detailing the significant safeguards imposed by these investors to protect themselves in the event of crypto market turbulence. This is particularly true considering that “two of the funds that invested estimated that at least 90% of the company’s net asset value came from the XRP token .”
Put option with guaranteed return and “liquidation preference”
As a reminder, Ripple holds a supply of XRP in an escrow account currently estimated at 34.5 billion units according to the xrpscan website, or approximately $70 billion. A significant sum, yet one that has nearly halved since last July ($125 billion), when the price of XRP hit its all-time high of $3.65.
Ripple’s XRP has fallen by more than 40% since its last peak
A drop of more than 40% that allows us to view the options imposed by Wall Street investors in a whole new light, particularly considering that this involves the ability to sell their shares back to Ripple after 3 or 4 years with a guaranteed annualized return of 10%, unless the company goes public during that period.
If Ripple decides to repurchase these shares, it will have to offer an annualized return of 25% in exchange. In any case, these VIP investors also benefit from a “liquidation preference” clause designed to guarantee them priority over other shareholders in the event of a sale or bankruptcy.
