After a significant legal victory over the U.S. Securities and Exchange Commission (SEC) regarding the status of XRP, Ripple has chosen not to pursue an initial public offering (IPO) at this time, opting instead to remain a private entity. This decision reflects the complicated relationship between cryptocurrency firms and public markets, rather than a commentary on Ripple’s financial health.
In July 2023, a court ruling determined that XRP is not considered a security when sold on public exchanges, a verdict many viewed as the final obstacle for Ripple to transition to the public market. Traditionally, a startup emerging victorious from such prolonged litigation would typically seek to capitalize on its success, rewarding investors, tapping into capital markets, and considering a public listing. Instead, Ripple has stated that it currently has “no plan, no timeline” for going public. Ripple President Monica Long highlighted the company’s substantial funding — approximately $500 million — and a private valuation nearing $40 billion, suggesting that Ripple does not require public markets for its growth.
This choice places Ripple apart from other cryptocurrency firms that have entered the public market and faced significant challenges. For instance, Coinbase’s direct listing in 2021 was initially considered a landmark event for the crypto sector. However, its stock performance has been volatile, showing about a 30% decline earlier this year, even as the broader crypto market showed some recovery. Similarly, Robinhood, another significant player in the U.S. crypto trading space, has struggled since its IPO in 2021, suffering from market cycles, downturns in trading activity, and ongoing regulatory scrutiny.
By opting to remain private, Ripple sidesteps potential earnings volatility and pressure from equity investors who may lack a deep understanding of the cryptocurrency landscape. The public market’s quarterly earnings benchmarks can create intense scrutiny, particularly problematic for crypto companies that often experience erratic revenue streams and face regulatory challenges. Additionally, Ripple’s substantial holdings of XRP could complicate a public listing, potentially causing friction between token holders and equity investors, as there might be a push to monetize XRP reserves in ways that could alter Ripple’s business model.
While Ripple successfully navigated a legal conflict with the SEC, the broader landscape remains fraught with uncertainty. Ongoing regulatory pressures and a lack of cohesive legislative frameworks for cryptocurrency could complicate a transition to public markets, potentially requiring more transparency and compliance disclosures. In a private capacity, Ripple retains greater flexibility and freedom to maneuver amid these uncertainties.
Importantly, Ripple currently does not face a liquidity crisis, with its sizeable funding allowing it to expand without the immediate need for public investors. This strategic avoidance of public markets highlights a growing tension between cryptocurrency firms and traditional public market expectations, where investors typically favor stability and regular earnings.
Ripple’s hesitance to go public underscores an important point: the infrastructure of public markets may not be suitable for crypto-native companies. These firms often operate in highly volatile environments, focusing on complex token economies and fluctuating legal landscapes that traditional investors may find challenging to evaluate. This disconnect often leads to significant penalties in public valuations during trading downturns or regulatory shifts, putting additional pressure on these companies.
For Ripple, the implications of public market pressures and token holder expectations would create a complicated balancing act, one that few firms have successfully managed. By delaying its IPO, Ripple appears intent on ensuring that more favorable market conditions, clearer regulations, and a deeper understanding from potential investors lead its eventual public offering.
Ultimately, Ripple’s decision illustrates a broader lesson for the cryptocurrency industry: public listings are not a foregone conclusion, and firms must carefully consider timing, governance, and brand alignment before venturing into public markets. While Ripple may have triumphed over the SEC, its quest for mainstream acceptance and growth continues, and its choice to sidestep Wall Street for now may be a strategic advantage in the long run.
