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A private exchange which trades in Ripple equity has expressed concerns about the long term viability of the remittance and settlements solution provider. Researchers raised doubts on whether an IPO would be successful, but suggested that Ripple would fare better if it was taken over by a larger institution.

The report was published by SharesPost, an Alternative Trading System (ATS), which investigated whether a Ripple IPO would be an attractive investment. The main concern was that although cryptocurrencies, like XRP, could clearly work as a settlements solution, competition from established finance would be a significant obstacle, one which researchers weren’t altogether certain Ripple could overcome.

The payments sector is worth more than a trillion dollars, but it is highly competitive. “Payments is a crowded landscape with big banks, processing firms and now Blockchain based payment startups chasing the same market,“ the researchers said in the report, which was published last week.

“Ripple enjoys a significant market opportunity and is uniquely positioned to grow given its partnerships with major financial institutions around the world,” said SharesPost Research Analyst Alejandro Ortiz, in a statement.

However, firms like Ripple are “unlikely to be profitable anytime soon,” due to the risk of losing out to well-heeled incumbents. Established competitors already have the purchasing power to create their own solutions – like JPM Coin – or take over companies developing something similar.

SharesPost is an online marketplace that allows accredited or institutional investors to trade pre-IPO stock, including equity in Ripple Labs. Ripple has raised more than $90M from two funding rounds, as well as revenue earned by periodically selling XRP tokens from its escrow account.

Ripple has a lot going for it. RippleNet, the underlying product, is a “safe, efficient and reliable alternative to existing payment methods,” researchers found. An IPO would certainly generate a lot of interest, and speculation over a possible offering has been mounting for years. Ripple CEO Brad Garlinghouse told CNBC in September 2017 that although the company was not yet ready for an IPO, it would “make sense” at some point in the future.

SharesPost researchers also looked at seven comparable public offerings from companies like Mastercard, PayPal, Visa and Western Union. They found that, on average, equity value increased tenfold above the initial price following a public offering. If financial institutions adopt RippleNet, the Ripple IPO could become highly lucrative.

The researchers suggest that Ripple could actually become “an attractive target” for a large financial institution. Many large banks are already developing their own settlements solutions, into which Ripple’s ledgers could be easily integrated. Although not as lucrative as public offering, companies similar to Ripple experienced, on average, a sixfold increase in the value of their equity after being acquired by larger entities.

Source: SharesPost

Although the Nasdaq composite fell to $6,300 in December, the tech sector has largely recouped its losses. As the recent Lyft IPO shows, the appetite for “Silicon Valley offerings” remains insatiable, at least for the time being.

But the stakes remain high, and an IPO could engage Ripple in a David-and-Goliath battle against the banks. Although Ripple has a head-start, a nearly-limitless resource pool could allow competitors from established banks to catch up.  Unlike the well-known story, the giant could crush Ripple long before the creator of XRP even has time to load its slingshot.

The author is invested in digital assets, including BTC and ETH which are mentioned in this article.

The post Ripple IPO Could Pit XRP Against Goliath: Report appeared first on Crypto Briefing.

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