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- The acquisition by VivoPower follows two months of due diligence and is part of a broader strategy to combine direct and indirect XRP ownership with equity in Ripple.
- CEO Kevin Chin said the deal structure could lower VivoPower’s effective XRP acquisition cost by up to 86% compared to open-market purchases.
VivoPower International PLC has announced that it is acquiring a major stake in Ripple Labs. This move grabbed massive attention as it would grant VivoPower an indirect position to hundreds of millions of XRP tokens at a large discount to current market prices. After the announcement, the VivoPower stock jumped 16.47% on Monday, August 11.
VivoPower To Acquire Major Stake In Ripple
The Nasdaq-listed company confirmed it will allocate $100 million toward buying privately held Ripple shares from existing shareholders, pending final clearance from Ripple’s management, as mentioned in our previous report.
The announcement comes after two months of due diligence process. Moreover, it is part of the larger strategy wherein the company aims to have both direct and indirect ownership of XRP, and stock ownership in Ripple.
According to the current market values, the contemplated investment would translate to an underlying exposure to an amount of approximately 211 million XRP, which would be worth about $696 million if acquired outright.
For context, Ripple, which minted a fixed 100 billion XRP at launch, still retains 41 billion tokens, most in escrow. Some 14 million tokens are permanently burned, so the supply is slightly deflationary. Now, VivoPower indirectly owns a part of XRP reserve held by Ripple in escrow.
Further, Ripple has diversified operations that go far beyond XRP, such as the RLUSD stablecoin. It has also acquired the prime brokerage platform Hidden Road, digital asset custodians Metaco and Standard Custody and Trust Company, and Rail. VivoPower also considered these initiatives before making the latest investment move.
Why VivoPower Chose To Purchase Ripple’s Shares
Kevin Chin, the Executive Chairman and CEO of VivoPower explained that the two-fold strategy of acquiring Ripple shares and XRP tokens should reduce the average cost of purchase by the company per token. Adam Traidman, former Ripple board member and presently serving as VivoPower Advisory Board Chair, made an observation that the strategy might enable the purchase of exposure to XRP at up to an 86% discount in lieu of buying the cryptocurrency in the open market.
However, it’s worth noting that the valuation metrics behind the deal suggest VivoPower is buying into Ripple at a weighted average of about $19 billion. It’s far below the estimated $135 billion value of Ripple’s XRP holdings alone. No value was attributed to Ripple’s other businesses in those calculations, meaning the additional assets and revenue streams come as part of the package.
VivoPower pointed to the fact that it would avoid the use of special-purpose vehicles in the ownership of Ripple shares, instead taking them into direct ownership. Whilst, the purchase will be supported by BitGo and Nasdaq Private Market which will provide custody and support transactions.