Speaking at the World Economic Forum in Davos, Brad Garlinghouse the CEO of Ripple announced that its IPO is happening sometime in 2020. Moreover, he believes that other cryptocurrencies will also follow Ripple and initiate IPOs to become publicly traded companies that issue and trade stock.
There are at least two possible scenarios of how this transition might happen that could affect XRP token holders:
First, Ripple completes an IPO and issues stock in the company and a portion of that stock is given to XRP holders (on a 1:1 basis, or scaled basis eg 1:5 or 1:10). In this way Ripple fulfils the SEC requirements that owners of XRP, which assuming it is deemed a security, gives the token owners a “piece” of the company. Investors would hold stock in Ripple and XRP as digital tokens. This model is reminiscent of what Overstock’s subsidiary Medici ventures is doing. Overstock is building out a subsidiary with a platform to trade digital tokens. Overstock, an established public company, is in the process of issuing a digital dividend, 1 OSTKP digital dividend token for every 10 shares of Overstock shares held by the investor. Its digital OSTKP token will be tradable on its tZero platform.
The second scenario may allow for conversion of existing XRP tokens to stock on a 1:1 basis. Precedent for this exists in the cryptocurrency world. Moonlite (MNL) is an Icelandic mining company that seeks to mine bitcoin and other altcoins and buy traditional financial assets such as stocks and bonds. At some point in the future with an established portfolio of assets built from its mining the company intends to convert from an ICO to an IPO. It is suggested the company will offer token holders shares in the new company on a 1:1 basis. Essentially redeeming all the outstanding tokens for shares. In its whitepaper on page 21 MoonLite lays out its eventual transition plan:
ICO to IPO
Moonlite reserves the right to ‘go public’ by way of offering shares in a traditional IPO. At that time, MNL tokens will be redeemable for stocks.
The Securities and Exchange Commission (SEC) has been investigating XRP and have yet to decide if the cryptocurrency is a security or not. There is much speculation that given XRP’s relationship to Ripple and its function that XRP will be classified as a security. The CEO of Ripple is well aware that if deemed a security that the company will have to give token holders shares in the company. Taking Ripple public (including the large escrow of XRP it holds) embraces the SEC ruling of XRP as a security. Moreover, it legitimizes its use by American businesses internationally with regulatory oversight for companies that use XRP in international settlement transactions. In my opinion taking Ripple public and embracing XRP as a security is one of the best moves for the company. The impact to XRP price in the short term remains uncertain but continued long term use and adoption by banks will see the token stabilize and continue on its projected use case path.
Leave a comment below. What do you think will happen to XRP’s price if it is designated a security by the SEC and Ripple conducts an IPO later this year?
