Figma shares surged nearly 158 per cent in their market debut on Thursday, valuing the design software maker at about US$50 billion and setting the stage for a flurry of high-growth tech listings.
The market for U.S. initial public offerings has bounced back from a tariff-driven volatility, which briefly paused listings in April, and is on track to end a nearly three-year dry spell.
Figma’s valuation at debut far exceeds the US$20 billion price tag from a now-abandoned buyout deal with industry giant Adobe in December 2023.
“Fast-growing software IPOs have been extremely rare during the past three years, so deals like this tend to get a lot of attention,” said Matt Kennedy, senior strategist at Renaissance Capital, a provider of IPO-focused research and ETFs.
“Because of this three-year bottleneck, tech IPO investors have been starved for new deals.”
The stock opened for trading at US$85 apiece on the New York Stock Exchange and was trading 200 per cent over its IPO price of US$33 in afternoon trading.
Recent tech IPOs have drawn strong investor interest and delivered solid post-listing gains, fueling optimism around new offerings from high-growth and AI-focused firms.
“From a private markets perspective, Figma’s IPO is a bellwether event for the tech sector,” said Derek Hernandez, senior analyst, emerging technology at PitchBook.
Figma makes collaborative design software used to build websites, apps and digital products, and customers include streaming giant Netflix, travel firm Airbnb and language learning app Duolingo.
Its prominent backers include Silicon Valley venture capital giants Kleiner Perkins and Sequoia.
“If you look at Figma’s positioning around AI, and the ability to deliver massively improved experiences to its customers with AI, that was not obvious back in 2022,” said Andrew Reed, a partner at Sequoia Capital and a board member of Figma.
Sequoia Capital first invested in Figma at US$1.10 a share during the company’s Series C round. With Figma pricing its IPO at US$33 a share, Sequoia stands to make a significant return on its roughly US$150 million investment, according to a source familiar with the matter.
Meanwhile, the broader markets touched new record highs on Thursday as Microsoft’s blockbuster earnings fueled investor confidence in Big Tech’s hefty investments in artificial intelligence.
AI race
Design software firms are racing to integrate generative-AI tools that automate tasks such as image creation, layout suggestions and code generation, as companies jostle to win enterprise clients and creative teams.
Figma, in its IPO filing, flagged intense competition, particularly from rapid AI adoption, as a potential headwind, warning it could cede market share.
“We’ve embedded different flavors of AI - both to lower the floor (and) allow more people to participate in the design process - while also raising the ceiling for individuals (and) for companies to be able to have even more high craft in what they’re creating,” Chief Financial Officer Praveer Melwani said.
The effort has accelerated since Adobe, Microsoft and others began rolling out AI features aimed at speeding up workflows and cutting costs.
“Software companies with a strong AI element to them seem to be assets that investors want to buy,” said Will Braeutigam, U.S. capital markets transactions leader at Deloitte.
Figma, for its part, has rolled out several products built around AI as it looks to stay competitive and meet growing demand for automation in design workflows.
“If this company didn’t have an AI strategy, it would not be seeing this level of demand,” Renaissance Capital’s Kennedy said.
Morgan Stanley, Goldman Sachs, Allen & Co and J.P. Morgan are the lead underwriters of the IPO.
---
Reporting by Manya Saini and Niket Nishant in Bengaluru and Echo Wang in New York; Additional reporting by Pritam Biswas; Editing by Sriraj Kalluvila and Tasim Zahid
