Ripple IPO is Coming Up: Will it Be the Catalyst to XRP Bullrun?

Data & Research / 20.05.2020

Ripple’s IPO could happen within the next year. Brad Garlinghouse, the Ripple CEO, made this massive announcement while speaking at the World Economic Forum in Davos. The industry executive told a crowd at the Wall Street Journal event that an initial public offering (IPO) is a “natural evolution” for the company. 

The World Economic Forum is one of the world’s most critical financial gatherings, and Ripple sponsors the event. While speaking there, the CEO opined that IPOs would be more prevalent in both the crypto and blockchain space in the coming year:

“In the next 12 months, you’ll see IPOs in the crypto/blockchain space. We’re not going to be the first, and we’re not going to be the last, but I expect us to be on the leading side… it’s a natural evolution for our company,” he said. 

During Series C funding, which is usually the last step before a company goes public, Ripple secured a whopping $200 million. This amount is the highest the firm has obtained from private funding in the last eight years of its existence. Cumulatively, Ripple has raised close to $293 million in funding to date.

According to The Block’s Research, Ripple has sold a total of $1.22 billion worth of XRP. From the numbers, it seems Ripple is netting money pretty smoothly. So, why does the company need to go public?

A Delve into Ripple

Ripple is an American technology company based in San Francisco, launched in 2012. It was initially named OpenCoin, and was developed to create an efficient global cross-border payment solution. Since 2013, the company has primarily been privately funded.

The platform rebranded to Ripple in 2015 and is behind the cryptocurrency XRP and the XRP ledger. It was designed to allow financial institutions to transfer money from different types of currency in a matter of seconds, anywhere in the world. 

The term “Ripple” is often incorrectly used to refer to the crypto token, XRP, created and developed by the company. XRP, the third-largest crypto, is the ticker/official name of the digital currency used by the US technology company. Since 2012, the company and its token have gathered significant prominence in the crypto world. 

XRP and XRP ledger use open source technology running on a peer-to-peer network server. This technology is quite similar to Bitcoin in terms of structure and technical data. 

How will Ripple’s IPO Affect XRP Prices?

In the wake of the announcement that Ripple could go public in the next year, there wasn’t any significant change in XRP prices. Then again, this isn’t the first time the CEO alluded to the company going public. Nevertheless, Garlinghouse was onto something when he said there are chances of a rise in IPO on the crypto and blockchain space. 

Crypto companies are on the lookout for opportunities to gain regulatory approval to access lucrative markets. Reassuring regulators and meeting their stringent regulatory standards could mean attempting an integration with the mainstream financial industry through going public.  

However, many investors and financial companies on the mainstream platform don’t understand digital currencies and their potential. They are also reluctant to take on the high-level risk associated with cryptocurrency. So, there is no clear-cut answer to whether Ripple’s IPO is the best route for the company. 

XRP Price Fall

As a company that’s already generating good profits from XRP sales, some experts think that its IPO could do more harm than good. An IPO will put Ripple at the mercy of investors, which could ultimately affect XRP prices. Commentators are going as far as predicting that XRP will likely fall in the face of an IPO. 

Allen Scott, the Head of Cointelegraph Markets, supports this thought on XRP’s future existence in an IPO.

“Many see Ripple selling XRP regularly as a recurring ‘IPO’ already sans shareholder rights,” he said. “So, this might hurt Ripple – it would put into question not only its operational costs and business model of dumping on the market but, more importantly, the existence of XRP,” Scott added. 

According to Rakesh Upadhyay, a crypto analyst, Ripple is yet to breach the global money transfer industry in a significant way. Ripple has been selling tokens, showing that it’s not making enough money to fund its operations. He also believes that the numerous deals Ripple is making with banks and other institutions will not buffer it from hardships come an IPO.

“Though making inroads, it is yet to disrupt the global money transfer system in a major way. Initially, after the IPO, the market participants might be patient, but they will soon seek results. When the results don’t come through, it will hurt prices,” he said. 

Rakesh Upadhyay elaborated:

“A sharp fall in prices will make it difficult for Ripple to raise money. It has been selling tokens, which shows that it is not making enough money to fund its operations. But unlike before, after the IPO, Ripple will also not be able to sell tokens before announcing beforehand. When announced, this will again hurt prices.”

To pursue an IPO, Ripple will have to disclose its finances to the public. If they have indeed been selling tokens because they can’t fund operations, then the IPO might not work in their favor.

XRP Price Rise

However, an IPO comes with a lot of opportunities for a company. The money raised from an IPO could help Ripple strengthen its infrastructure and network. This can act as a long-term investment in readiness for a more extensive breach into the global money transfer industry. A fresh injection of capital will also reduce the reasons for Ripple to continue selling its XRP tokens to raise funds. 

Some analysts believe that the capital from an IPO will positively affect the prices of XRP and ultimately lead to bullish.

Marti Greenspan, the founder of Quantum Economics and an ex-eToro analyst, said that an IPO could potentially allow Ripple to strengthen its position and XRP.

“Should Ripple sell less XRP as a result of the IPO, it would be bullish,” he said. “I have a feeling that this would be positive. Additional funding for Ripple would mean fewer reasons to sell the token.” He mused.

He added that the sale of Ripple shares would give the company a bigger capacity to participate in more business deals and acquisitions.  

Author’s Note

It remains to be seen whether Ripple will go public this year, but if or when it happens, will the XRP prices be affected positively or negatively? Seeing as analysts are split on what will happen to XRP prices, that question won’t have a conclusive answer until the IPO happens.

Another uncharted possibility is that the IPO will not affect XRP prices in any way. We can expect to see a rise in the number of company IPOs in the coming years if the market remains receptive. 

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A creative writer in the field of content writing for the past 7 years. Iulian is passionate about his work and his interest in areas such as technology, travel, sports, literature and gastronomy have aided him to the research quality in articles that reflect these themes. Recently, he discovered the Bitcoin and the blockchain technology and he’s a big fan now.