Figma’s Post-IPO Struggles Highlight a Bigger Market Lesson

• Figma (FIG) held their IPO on July 31 and saw shares fly over 400% on opening day

• FIG held their first public earnings call on September 3 and disappointed investors

• Shares have cratered since the IPO, and took another 20% hit after the poor earnings call

Figma’s first earnings report as a public company on September 3 sent shares plunging after hours and into market hours on September 4 as investors digested slower-than-expected guidance and the looming end of insider lockups. 

This move serves as a reminder that euphoric IPOs often set a bar that’s hard to clear, and Figma is far from alone in that regard. 

IPO Darling to Market Reality

Figma held their IPO on July 31st, priced at $33, and then exploded on day one, opening at $85 and closing above $117, for a debut surge of roughly 350%. The following day, August 1, shares peaked at $143, close to a 450% increase from the initial listing price… and then they began to slide. 

And slide. 

And slide. 

By the time Figma held their Q2 earnings call on September 3, shares were trading at around $67, which is still 200% higher than the initial listing price, but was over 20% below the actual opening price on the day of their IPO. 

In that earnings call, Figma missed consensus estimates for earnings per share (EPS) by 1.5% ($0.085 reported vs. $0.087 estimated) and matched consensus estimates for revenue ($249.64 million reported vs. $249.59 million expected). Furthermore, management’s current-quarter revenue outlook came in below Wall Street’s expectations, and, most critically, the company’s first lock-up has expired, allowing employees to sell shares for the first time. 

All of this bearish news culminated in a massive selloff at open on September 4, with shares opening down 20% from the previous day’s close and improving only marginally to down 19% throughout the trading day. 

What Figma Does, and Why Investors Care

Figma sells collaborative design and whiteboard tools, like Figma Design and FigJam, used by product teams. Most revenue is subscription-based and seats/usage scale with customer adoption. 

The bullish case for Figma is that they are a strong brand with viral adoption, robust growth at scale, a long runway in enterprise design, developer collaboration, and ecosystem add ons. On the other side of the coin is the bearish case; hyperscaled expectations after a blockbuster IPO, sensitivity to seat growth and enterprise budgets, competition from Adobe and other startups, and a post-lockup supply overhang flagged by management all work against the company’s future prospects. 

Lessons From Coinbase, Snowflake, and Now Figma

Figma is not alone in the cycle of an overhyped IPO followed by a months-long correction. Other companies, like Coinbase (COIN) and Snowflake (SNOW) had similarly hyped IPOs and subsequent rundowns, and in the case of both of those companies, took years to reach their IPO day highs again. 

Debut spikes reset the “starting line.” When a stock gaps up a triple digit percentage on day one, future prints must be near-perfect just to defend that multiple. 

Coinbase is a great case study; on their first trading day, they set an intraday high of $429.54. That price, achieved on their IPO day, would remain the company’s all time high for over four years. It was briefly eclipsed in July of this year, with the new mark resting at $445.22, and has since cratered back down to the low $300 range. All of this illustrates how initial prints can overshadow actual fundamentals for years. 

Snowflake’s IPO was similarly extreme, pricing at $120 and closing their first day near $254. Snowflake held their IPO on September 16, 2020, and as of today, nearly five years later to the week, it has never returned to that IPO day closing price. The highest it has been since was $249.99 on August 28 of this year, and it has since fallen back to the low $220 range, still working to catch up to their IPO narrative. 

The pattern here? Big pops on day one compress forward returns, raise the risk of disappointment, and make standard operational hiccups look like thesis breaks. 

The Key Metrics That Will Decide Figma’s Future

The first critical factor for Figma’s future prospects is the pace of growth vs. premium multiple. A 41% year-over-year increase in revenue (which Figma reported on September 3) is strong, but any guide that hints at moderation can trigger step-down resets when the valuation bakes in perfection. 

The second major factor is Figma’s revenue mix and monetization. Investors will parse net additions, seat expansion, and adoption of add-ons to gauge durability beyond early-stage hype and virality. 

Lastly, Figma’s share supply dynamics are paramount. Partial lock-up expirations add tradable float and can weigh on price action regardless of fundamentals, especially after a hot IPO like the one they just had. 

IPO Hype Cuts Both Ways

IPO hype is not destiny, but it is gravity. Coinbase and Snowflake show that day one price levels can take many years to earn back, even for category leaders. Figma is already down over 60% from their day one highs, and only time will tell when they will see those highs again. 

Gus Downing is host of the tastylive Network show Risk and Reward. @GainsByGus

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