After a strong debut, Figma's stock dropped 23% on Monday, falling to $92.75 as investors cashed in on gains. This slump reduced the company’s market value to $45.2 billion.
Figma, the company behind popular design software, had a good start in the stock market. After a blockbuster debut on Thursday, where its shares soared 250% from an initial price of $33 to $115.50 on the New York Stock Exchange, the stock even rose to $122 on Friday, giving the company a market value of nearly $59.5 billion.
However, on Monday, Figma's share price slumped by 23% as investors began "profit taking", selling their stock to cash in on the huge gains. The price dropped as low as $92.75 on Monday, cutting the company's market value to about $45.2 billion. Even after that fall, the stock is still worth more than two and a half times its original IPO price.
As per the post by Michael Ashley Schulman, chief investment officer at Running Point Capital in Los Angeles
"The excitement for Figma's business is not over, but the euphoria that's gone into its heady stock pricing seems to be deflating as those that wanted an early piece of the action bought in during market hours while some IPO recipients are probably taking sweet profits.”
The Strategy Behind the Price
The massive jump on the first day sparked debate about whether the initial price of $33 was too low. It was, in fact, a strategic decision. Figma’s CEO, Dylan Field, and the banks involved in the IPO deliberately set a lower price to attract long-term investors who would provide stability to the company. While a prominent venture capitalist criticized this approach, arguing that Figma left billions of dollars on the table, the strategy was ultimately seen as a success.
A Good Result in the End
Despite the stock's recent volatility, the company's valuation remains strong, at over $56 billion. This is almost triple what Adobe had offered to buy the company for in 2022, a deal that regulators ultimately blocked. The company’s decision to price shares lower, although controversial, was seen by experts as a good move to attract the right kind of investors and generate positive buzz around a successful launch.
