Ripple is sitting on close to $80 billion and could cash out hundreds of millions per month — but it isn’t

Ripple could bring in hundreds of millions of dollars a month by selling a tiny fraction of its XRP holdings.
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Sixteen months ago, Ripple raised $55 million by selling equity in a typical Silicon Valley funding round from strategic investors, following earlier financing from Alphabet’s GV (Google Ventures), Andreessen Horowitz and others. The round placed the value of the company around $400 million.

Today the San Francisco start-up could bring in many times that amount of cash every month — if it wanted to — without giving up any company ownership or control.

Ripple develops software that banks use for fast global financial settlements. But almost all of its current value comes from being the creator and majority holder of XRP, a digital currency that was obscure a year ago, but now has a total market value of about $130 billion.

XRP, which trades publicly like bitcoin, went on an inexplicable rally starting last year. Even after plummeting from a high of $3.84 in early January to $1.30 (including a 30 percent drop on Tuesday), it’s still up almost 200-fold in the past 12 months.

Ripple owns about 60 billion of the 100 billion XRP created, giving it a market value — based just on its holdings — of close to $80 billion.

The company’s revenue is unknown, although CEO Brad Garlinghouse told us that some banks are paying the company millions of dollars for its software. Regardless, $80 billion is far ahead of where any reasonable investor would value the company.

A tough company to value
Ripple has placed limitations on how much XRP it can sell each month to remove the concern that it will suddenly flood the market with tokens. The company placed 55 billion of its XRP in a “cryptographically-secured” escrow account and can release up to 1 billion every month. Ripple has never come close to selling that amount in a month and said in December that it’s averaged selling 300 million XRP a month since mid-2016.

By selling a tiny fraction of its holdings each month, the company brought in over $90 million in the first three quarters of 2017.

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