Understanding SBI’s Position on Ripple Holdings

SBI Holdings has informed its shareholders that its significant investment in Ripple Labs will not be reflected on its balance sheet until Ripple either goes public or receives a thorough independent valuation. This decision leaves a substantial amount of unrealized profit unacknowledged for the time being.

Financial Performance and Ripple’s Valuation

In its fiscal-year 2024 financial results, SBI reported a remarkable 19.3% increase in consolidated revenue, reaching ¥1.443 trillion ($9.39 billion). Profit before tax nearly doubled, reaching ¥282.3 billion ($1.83 billion), fueled by substantial contributions from private-equity revaluations and a thriving crypto-asset division.

Unlocking Ripple’s True Value

Within the realm of private equity, SBI’s presentation highlighted the accounting approach for their unlisted holdings in Ripple: “The value of XRP held in escrow by Ripple Lab Inc. will not be reflected in the corporate valuation until it undergoes an initial public offering (IPO) or a similar valuation process.”

Ripple’s Impact on SBI’s Growth

During the presentation, executives reminded investors of SBI’s longstanding support for Ripple, noting their nearly 10% equity stake. They cited Ripple’s escrow and circulating supply, estimating XRP’s market capitalization at approximately ¥20 trillion ($130 billion), with a portion of tokens still locked in escrow.

The Path to Realizing Unrealized Gains

In an extended Q&A session, SBI’s leadership explained the rationale behind keeping these gains off the books: “The value of XRP held in escrow will not be included in the corporate valuation until a clear assessment is determined through an IPO or other means. If incorporated, the profit would surge to an extraordinary level.”

Since the inauguration of Mr. Trump, the U.S. has placed significant emphasis on the crypto asset market, which is appreciated by SBI. The anticipation of Ripple’s potential public listing has been a persistent topic in Tokyo. SBI’s CEO, Yoshitaka Kitao, has consistently stated his expectation that Ripple will pursue a public offering once its legal issues with the U.S. Securities and Exchange Commission (SEC) are resolved.

Regulatory Developments and Ripple’s Future

Recently, on May 8, the SEC announced a settlement agreement that removes a regulatory obstacle hindering Ripple’s IPO plans. While this agreement does not provide a formal valuation, it resolves a significant barrier that had complicated IPO planning.

SBI’s crypto-asset business reported revenue of ¥80.8 billion ($526 million) and a profit before tax of ¥21.2 billion ($138 million), representing a 151.8% increase from the previous year. This growth was driven by market-maker B2C2 and an expanding retail customer base at SBI VC Trade.

Future Prospects and Strategic Vision

SBI’s total assets under management have already exceeded ¥10 trillion ($65 billion), with a goal to double that figure to ¥20 trillion ($130 billion) by the end of FY 2027. A Ripple listing could play a pivotal role in financing this expansion while reshaping the risk profile of the private-equity portfolio.

Despite the current lack of general understanding regarding SBI’s operations, both internally and externally, the conglomerate remains patient. Once Ripple’s valuation becomes transparent, SBI believes the resulting financial windfall will be evident.

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