Ripple: Disrupting The Payments Sector With Blockchain
April 8, 2019 | Blog

Ripple: Disrupting The Payments Sector With Blockchain

This blog is an excerpt from an investment report on Ripple. For more information, please login to your SharesPost account or register here.

Ripple was founded in 2012 by Chris Larsen and Jed McCaleb. The company is a pioneer in using Blockchain technology to create a practical solution. Through RippleNet, its payment platform that runs on a Blockchain, the company provides a seamless way to send money overseas money regardless of location or particular bank. With over 200 financial institutions piloting RippleNet, the company’s products represent a long awaited disruption to the $1.75 trillion payments industry.

Ripple also owns XRP, the cryptocurrency that runs on RippleNet to provide a low-cost cross-border transaction and eliminate risks associated with payment processing. Ripple created a total of 100 billion XRP, of which nearly 40 percent currently circulates. XRP is the third largest cryptocurrency traded on global crypto exchanges after Bitcoin and Ethereum.

The company, which employs more than 300 people, raised $93.5 million over two funding from prominent investors like Blockchain Capital, Andressen Horowitz and Google Ventures. While we cannot yet establish a valuation range for Ripple, investor sentiment has been pretty positive for the company. Previous mutual funds marks and secondary transactions suggest Ripple peaked during early 2018, with investors valuing the company up to $1.8 billion, when the crypto market was at an all time high. Since the onset of crypto winter in 2018, Ripple’s valuation came down to $800 million to $1.1 billion. Should the Securities and Exchange Commission offer favorable regulatory guidance in the future, Ripple will likely enjoy a valuation boost since the company already makes scalable products that global financial institutions could adopt.

Ripple Valuation based on Mutual Funds and Secondary Market Transactions

Ripple competes in the payments sector, a huge market opportunity. The company enjoys an early lead thanks to its products and partnerships with major financial institutions across the globe. However, Blockchain is still nascent technology; the impact of any regulatory changes to the cyptocurrency and Blockchain industry need to be closely monitored.

Investment Thesis:

The Upside Scenario:
  • Market opportunity: Blockchain-based payments markets are young and Ripple is already a leader with the potential to disrupt the global payment industry.
  • Partnerships: Ripple has struck partnerships with over 200 global banks, threatening incumbent financial institutions.
  • XRP: The cryptocurrency is expected to decrease costs and increase speed, security, and reliability of cross border payments. The third most popular cryptocurrency reached an all-time high of $3.19 in early 2018 and is traded on all popular exchanges in the United States and across the world.
Downside Risks:
  • Unclear profitability potential: Ripple’s success is partly dependent on the industry’s adoption of Blockchain technology. The regulatory situation around Blockchain and crypto remans unclear so we don’t expect Ripple to be profitable any time soon.
  • Competition from incumbents: Deep pocketed banks and payment companies offer a tough challenge to Ripple. The company needs to differentiate itself by to continuing to innovate.
  • Margin pressure: The growing list of payments companies can lead to increased competition and margin-pressures, eventually leading to industry consolidation.
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PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

This article does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

Securities referenced in this article may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2020. All rights reserved.