Ripple’s $500 million stock sale last month attracted some of the biggest names in global finance, but only after investors secured a series of downside protections that resemble structured credit more than a typical venture capital round, according to a Bloomberg report.
Citadel Securities, Fortress Investment Group, Marshall Wace, Brevan Howard-related vehicles, Galaxy Digital and Pantera Capital participated in last month’s funding round at a valuation of $40 billion, the highest ever for a private crypto company.
But under the hood, Bloomberg’s Ryan Weeks writes, several funds treated it as a concentrated bet on a volatile asset.
Several investors concluded that at least 90% of Ripple’s net asset value was tied to XRP, the closely related token that legally maintains its distance from the company. Ripple controlled $124 billion worth of XRP at market prices as of July in its treasury.
Institutions seem comfortable with this exposure, but only with guardrails in place. This large and risky exposure led the funds to negotiate unusually strong protections: 1. The right to sell their shares back to Ripple after three or four years with a guaranteed annualized return of 10%2. A 25% annualized return if Ripple forces a buyback, and 3. A liquidation preference, giving them priority over historical shareholders in the event of a sale or insolvency.
These terms provide a synthetic floor under investors’ capital, making it a structure rarely used in late-stage tech financings, but increasingly common as traditional finance adapts its risk management playbook to crypto volatility.
XRP has since fallen around 40% from its mid-July peak, amid the broad wave of declines that hit the broader crypto market in October and November.
Meanwhile, US spot XRP ETFs are on track to soon surpass $1 billion in inflows, following a 15-day streak of net investments. ETFs likely benefited from the resolution of Ripple’s lawsuit with the SEC, which clarified the regulatory status of XRP.
Mail sent to Ripple’s press inquiry page and media representatives were not immediately responded to Monday morning in the United States.
