Ripple’s $500 million share sale last month brought in 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 round, according to a Bloomberg report.
Citadel Securities, Fortress Investment Group, Marshall Wace, Brevan Howard-linked vehicles, Galaxy Digital and Pantera Capital participated in last month’s funding round at a $40 billion valuation, the highest ever for a privately held crypto firm.
But under the hood, writes Bloomberg’s Ryan Weeks, several funds treated it as a concentrated bet on one volatile asset.
Several investors concluded that at least 90% of Ripple’s net asset value was tied to XRP, the closely related token that keeps distance from the company legally. Ripple controlled $124 billion worth of XRP at market prices in July in its treasury.
Institutions seem comfortable with that exposure, but only with guardrails in place. The massive, risky exposure prompted funds to negotiate the unusually strong protections: 1. The right to sell their shares back to Ripple after three or four years for a guaranteed 10% annual return,2. A 25% annual return if Ripple forces a buyback, and 3. A liquidation preference that gives them priority over older shareholders in the event of a sale or insolvency.
These terms amount to a synthetic floor under investors’ capital, providing a structure rarely used in late-stage technology finance but becoming increasingly common as traditional finance adjusts its risk management playbook to crypto’s volatility.
XRP has since fallen about 40% from its peak in mid-July amid the broad downdraft that hit the broader crypto market in October and November.
Meanwhile, US spot XRP ETFs are on track to surpass $1 billion in inflows soon, following a 15-day streak of net inflows. The ETFs likely benefited from the resolution of Ripple’s lawsuit with the SEC, which clarified XRP’s regulatory status.
Emails sent to Ripple’s press inquiries page and media representatives were not immediately answered in the US morning hours on Monday.
