Ripple CTO Cites “Lack of Liquidity” as Reason for Ripple Massive Buyback

Ripple’s Chief Technology Officer, David Schwartz, has shared his perspective on the ongoing discussion regarding Ripple’s proposed buyback. 

For context, The Crypto Basic has uncovered that Ripple plans to repurchase company shares from initial investors and employees. The total figure is estimated at $285 million.

Expectedly, the development has sparked diverse reactions within the XRP community. The concern was especially considering that the buyback decision arose from Ripple’s decision to step back from its initial public offering (IPO) plans in the United States.

Ripple Needs No IPO?

Crypto vlogger “Jungle Inc” contended that Ripple’s actions appear to carry a negative tone. This prompted Matt Hamilton, Ripple’s former director, to inquire about the usefulness of an IPO for Ripple.

Jungle Inc stated an IPO would demonstrate Ripple’s robust and expanding business performance. This perspective relies on the fact that a significant portion of Ripple’s business revolves around cross-border services, where the utility of XRP plays a crucial role.

Meanwhile, Hamilton argued that an initial public offering would make no functional difference for Ripple. He pointed out that, typically, companies pursue IPOs to raise additional funding. In contrast, given its buoyancy, Ripple has no pressing need for such financial infusion.

But it would make no functional difference. Companies do IPOs to raise funding. Ripple doesn’t need to raise funding.

— Matt Hamilton (@HammerToe) January 10, 2024

The Crypto Basic has recently disclosed that Ripple’s valuation has crossed $11 billion. Also, the firm holds over $25 billion worth of crypto.

Meanwhile, the crypto vlogger countered by suggesting that, even if not for capital, opting for an IPO could still be beneficial in attracting skilled developers and retaining key employees. 

Ripple CTO Reacts

In response, Ripple CTO David Schwartz stated that employees are concerned about having a pathway to liquidity for their stock options. He emphasized that they do not necessarily have to be publicly traded shares. 

Employees care that there be some path to liquidity for their stock options, RSUs, or whatever. There's no particular reason it needs to be publicly traded shares specifically.

— David "JoelKatz" Schwartz (@JoelKatz) January 11, 2024

Furthermore, Jungle Inc asked Schwartz the rationale behind Ripple’s share buyback if a liquid market exists. Ripple CTO clarified that there is no liquid market, highlighting that the market for equity in privately held companies is predominantly illiquid. 

Ultimately, this explanation sheds light on the motivation behind Ripple’s decision to repurchase shares.