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| Figma throws a block party outside the New York Stock Exchange. Melia Russell/Business Insider |
Figma’s debut on the stock market wasn't just impressive it was a revelation. The design software giant made a historic splash on Thursday, opening at $85 per share more than double its IPO price of $33 and closing the day with a jaw-dropping 250% gain. This marked the most significant first-day surge for a U.S. IPO of its size in over 30 years, a dramatic reminder that investors are still hungry for hot tech offerings.
While analysts have praised Figma for its strong fundamentals solid revenue growth, high margins, and a commanding presence in the design tools market many believe the real story isn’t just about the company itself. Instead, they say the staggering spike is evidence of how starved the market has become for big-name tech IPOs. In short, Wall Street appears to have vastly underestimated just how eager investors were for a tech company like Figma to go public.
According to Wing Venture Capital partner Tanay Jaipuria, the underwriters behind Figma’s IPO including Morgan Stanley, Goldman Sachs, JP Morgan, and Allen & Co. missed the mark in assessing demand. The result? Retail investors were largely locked out of the early gains, a recurring frustration for those watching big stock pops from the sidelines. “When you see an IPO soar like this, it reinforces the perception that the system isn’t built to benefit retail,” Jaipuria noted.
He emphasized, however, that Figma’s fundamentals don’t necessarily justify its $60 billion valuation. Instead, it’s the result of a larger market force a rush of demand from institutional and retail buyers who’ve been waiting for a quality tech company to list. Figma, in many ways, simply filled the void.
Others echoed the sentiment that Wall Street bankers miscalculated. Benchmark general partner Bill Gurley was especially critical. In a candid post on X (formerly Twitter), he blasted the banks for allowing such a mismatch in supply and demand, calling it “fully intentional.” Gurley argued that the pricing shortchanged Figma’s shareholders and employees by billions.
While representatives from Figma, Goldman Sachs, and JP Morgan declined to comment, and Morgan Stanley and Allen & Co. did not respond, the underlying message was clear: the IPO process left money on the table for insiders and revealed Wall Street’s blind spot when it comes to tech’s enduring appeal.
A Drought of Tech IPOs Finally Breaks
Figma’s monumental debut comes after nearly three years of silence in the tech IPO space. Only recently have other major VC-backed companies like Chime and Hinge Health begun testing the waters. But the market's response to earlier tech IPOs this year, including those from CoreWeave and Circle, has already suggested that appetite is building regardless of company fundamentals.
Gil Luria, head of technology research at DA Davidson, noted that while both Circle and CoreWeave surged on their public debuts, their business fundamentals lagged far behind those of Figma. “The enthusiasm we’re seeing is less about Figma itself and more about investors’ readiness to jump into any high-growth tech opportunity,” he said. “Figma just happens to be the best example so far of a company that actually deserves the excitement.”
David Erickson, a Columbia Business School professor and former investment banker, pointed out that Figma’s IPO priced the company at roughly 20 times revenue a premium in the world of software, where public comps average around six times sales. The bankers did adjust the price upward during the IPO roadshow, but even so, they didn’t anticipate just how far the stock would climb. “They expected a strong showing,” Erickson said. “But nobody predicted $85 on day one.”
Critics Say Billions Were Left on the Table
Those who sold shares during the IPO left significant money behind. Index Ventures, Figma’s largest shareholder, offloaded about 3.3 million shares, pocketing around $108 million. But at the $85 opening price, those same shares could have been worth nearly $280 million. Still, Index retained a stake valued at $7.2 billion based on Thursday’s closing price, softening the sting.
Figma itself sold 12.5 million shares about half the volume offered by insiders and already has $1.5 billion in cash and securities on hand. So while the company may have missed out on maximizing IPO returns, its financial stability remains intact.
Despite frustrations with the pricing strategy, analysts like Luria say Figma’s strong market performance could have a broader effect namely, encouraging other high-growth startups to jump into the public arena. “If you’re a private company with solid fundamentals and you saw what happened today, you’re likely having a conversation about going public,” Luria said.
That idea seems to be catching on. Parker Conrad, CEO of HR startup Rippling, hinted as much in a cheeky post on X: “How will the Figma IPO impact valuation for high-growth, late-stage SaaS companies in the private markets? Asking for a friend.”
Will Reality Catch Up With the Stock Price?
While Figma’s business is widely praised, some analysts are already forecasting a cooldown once the six-month lockup period ends and insiders begin selling. That flood of shares could put downward pressure on the stock.
The broader market could also be a factor. On Friday, just a day after Figma’s IPO, the S&P 500 dropped by nearly 2% following a major announcement from the White House that nearly all imports to the U.S. will soon be subject to a new 10% global tariff. Those kinds of macroeconomic shocks could impact even high-flying tech stocks.
Figma’s own shares were already volatile by day two. After opening Friday near $135, the price dropped to under $111 within minutes before stabilizing closer to $115 by midday. “Whoever bought in at $85 or higher may be the ones left holding the bag,” said Erickson. “In the short run, the market can get irrational. But in the long run, fundamentals win.”
Source:
www.businessinsider.com
