Market Data 
- Ripple’s CTO, David Schwartz, concerned about the transparency of synthetic pre-IPO shares.
- Ripple’s anticipated IPO valuation reaches discussions around $30 billion.
- Secondary market for Ripple shares grows despite investor warnings on risks.
The XRP community remains attentive to Ripple’s steps to become a publicly traded company. As discussions circulate about reaching $30 billion, pre-IPO shares in secondary markets have attracted controversies among investors and stirred several questions concerning their legitimacy and associated risks.
Synthetic Pre-IPO Stocks Raise Legitimacy Concerns
Synthetic pre-IPO stocks by third parties allow retail investors to get early exposure to Ripple before the public listing. Such products have received attention from the public and the community as they are presented as a means of more easily engaging in early-stage opportunities.
These markets are primarily concerning because they cannot provide adequate information and supervision. The skeptics’ major concern is that such shares float in a speculative market, putting investors at high risk. Compared to traditional securities such as float shares, synthetic shares do not have a direct link with Ripple’s offer and are more inclined to artificially inflated pricing and malpractice. This has led many within the XRP community to question such securities’ legal and moral acceptance.
Ripple CTO David Schwartz Highlights Investment Risks
Ripple’s Chief Technology Officer and co-founder, David Schwartz, recently commented on the matter. In a social media post, he warned those seeking investments in pre-IPO shares bought through secondary markets. Schwartz further pointed out that brokers do not give full and accurate information to retail investors, which puts the buyers at a disadvantage.
A huge problem with buying shares on secondary markets is everyone else (the seller, the broker) wants you to pay as high a price as possible and you are generally not entitled to any real disclosures.
I strongly suggest anyone thinking of buying shares on secondary markets, at…
— David “JoelKatz” Schwartz (@JoelKatz) December 14, 2024
Schwartz argues that brokers and middlemen focus on earning the highest fees from sellers while providing minimal information to buyers, the ordinary investors. He recommends that those involved in secondary market transactions use information from other sources besides brokers. As Schwartz points out, some tools can offer insight into these markets, but their efficiency is strongly related to the quality of available data.
Caution Urged as Ripple’s Public Listing Nears
Analysts have predicted that with Ripple’s official public offering around the corner, demand for pre-IPO shares will likely increase. Still, Schwartz’s comments remind investors to proceed cautiously on such prospects. Using insufficient or skewed information results in overreliance and potential insecurity, especially within a fairly saturated market.
Entrepreneurs are advised to research and authenticate any fact from a reliable source. Reading multiple quotes and knowing the risks of secondary market transactions can help avoid traps. Even though the interest in investing at the angel and seed rounds appears undeniably tempting, practicing proper due diligence in the context of highly risky investments is of great value.
