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Ripple valuation analysis of $10bn raise

By Daniel Webber | Thursday, January 9th, 2020

The holiday season passed with a $200m mega-raise for the  blockchain player Ripple, raising its valuation to $10bn. Does such a valuation make sense? Corporate-focused Alpha FX just reported on a strong 2019 and some enviable per customer revenues.

And finally, we look at the impact of the major hack and ransom demand at Travelex and its knock-on effects.  

Is Ripple worth $10bn?

Late last year, whilst most people were out buying last minute Christmas presents, Ripple raised a cool $200m, increasing the company’s valuation to  $10bn. Whilst Ripple is not the XRP digital currency, it does own close to 60% of all XRP. 

Ripple is working to replace SWIFT and to speed up cross-border payments to reduce the liquidity demands of cross-border payments businesses. But is it really worth $10bn?

Ripple valuation after $200 million investment in December 2020 and value of total XRP holding

There are three sources of value in Ripple: 

Holding in XRP

The first and key element is Ripple’s 57% holding in the crypto currency XRP, for a total value today of approximately $12bn, the majority of which is currently placed in escrow.

How you view the future value of XRP plays a large part in how you value Ripple. Yesterday’s price of 0.21 XRP:USD is broadly in line with the average price for 2017. 2018 saw the crypto bubble pull the XRP price up to 0.67 to the dollar. In 2019, the average price was back down to 0.31. 

Underlying operating business

Ripple has two key products, RippleNet (a messaging service that doesn’t use XRP) and On-demand liquidity (ODL) – its solution that uses XRP as a middle currency in cross-border transactions. MoneyGram, in which Ripple has invested $50m, is the largest known user of XRP. The USD/MXN corridor is Ripple’s most developed corridor. Latest reported estimates show that the crypto exchange Bitso, also backed by Ripple, is processing approximately 2.5% of the total USD to Mexico flow.

Investments

Ripple has made a number of investments either directly (MoneyGram, Bitso) or via its developer initiative Xpring. While only the amount of $50m invested in MoneyGram was made public, these investments are currently a rounding error in Ripple’s valuation and are mostly aimed at onboarding customers to help drive remittance flows via XRP.

Overall, the big unknown is how much of XRP’s value is reliant on the success of Ripple’s products and its investments. Right now, it’s too early to tell.

Alpha FX gaining scale in corporate space

Alpha, the mid-market focused UK based FX provider provided another strong trading update yesterday giving clarity on its 2019 performance.

The quality of customers appears to also be on the rise as seen by its average revenue by customer growing to c.£54,000/customer for 2019. Not bad for a sector driven by customers typically worth only three or four figures.

Alpha Revenue and Revenue per customer for the financial years 2015-2019

Track SME FX pricing in key markets across the globe. Speak to us about accessing  our pricing data.

Ransomed.

Cyber terrorism is real and Travelex, owned by Finablr, has been hit full on. Not only has Travelex had to take their site down but a malicious group called Sodinokibi claims to hold their customer’s data although Travelex disputes this. As of publication, the issue was still not resolved and a seven figure ransom demanded. 

Travelex statement about the cyber attack on its website on 7 January 2020

What impact?

Although a Travelex press release from Tuesday stated that the company does “not currently anticipate any material financial impact for the Finablr Group”, shareholders weren’t so kind knocking 18% of the share price yesterday to a historic low.

The effects are now spreading too. A number of UK high street banks are now reporting they cannot service their travel money businesses as they have not received the bank notes they need from Travelex.

Additionally, there is a question whether Travelex would have needed to report this as a data breach. The hackers claim they have personal data, Travelex’s statement says nothing has been exfiltrated. GDPR fines can be substantial and material if the data did get out.

We all hope that Travelex can get back to normal as soon as possible. Episodes like this hurt everyone from the customers all the way through the sector.

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