Action in the initial public offering (IPO) market is picking up after a spring freeze. There have been 120 IPOs priced so far this year as of July 30, an increase of 46% from last year, Renaissance Capital said.
Total proceeds from filings so far this year fell 21% from last year to $18.3 billion.
This year’s largest IPOs are stablecoin issuer Circle Internet Group (CRCL) and CoreWeave (CRWV), an artificial intelligence (AI) cloud firm, which raised $1.05 billion and $1.5 billion, respectively, in their offerings.
Spotlight on Figma: The Upcoming Star IPO
Wall Street will next look to Figma, a design software firm and past Adobe (ADBE) takeover target, which is expected to begin trading this week.
“Investor demand for Figma has proven to be incredibly strong, with shares reportedly oversubscribed by more than 30 times,” says Greg Martin, managing director at Rainmaker Securities.
This elevated demand for the shares “suggests long-term confidence in Figma and a view that their independence in the wake of the Abode deal collapse was ultimately beneficial, allowing Figma to accelerate their AI innovation while expanding their product line,” Martin adds.
Figma’s IPO Filing and Pricing Journey
In early July, Figma made public its filing with the Securities and Exchange Commission to go public. And on Monday, July 21, the software company priced its initial public offering, stating that it intends to sell about 37 million shares – including stock owned by current shareholders – at $25 to $28 each.
On Monday, July 28, Figma increased the price of its offering to between $30 and $32 per share. It raised its offering on Wednesday, July 30, to $33 per share, raising $1.2 billion for the software firm.
Figma’s prospectus also indicates that it has authorized the issuance of blockchain common stock “that our Board of Directors could use to, among other things, issue shares of our capital stock in the form of blockchain tokens,” though it added that it doesn’t have any specific plans currently to do so.
Figma will begin trading later today, July 31, on the New York Stock Exchange under the ticker symbol “FIG.”
Financial Performance and Q2 Preview
Figma also gave preliminary second-quarter results. For the three months through June 30, Figma reported revenue was 40% higher year over year in the middle of the range it expected.
It also anticipates non-GAAP operating income to land in a range of $9 million to $12 million compared to $4.9 million in the period a year earlier.
During Q1, the firm witnessed revenue increase 46% year on year and achieved net income of $44.9 million. It had 13 million active monthly users as of March 31, and 95% of the Fortune 500 are customers.
Scrapped Adobe Acquisition and Revised Valuation
Blue chip shares Adobe in 2022 committed to acquiring Figma for $20 billion, but the acquisition was scrapped when regulators in the U.K. raised antitrust concerns.
A few days after the agreement collapsed in late 2023, Figma revised its internal valuation to $10 billion.
According to its IPO price of $33 a share, Figma’s IPO values the company at about $19.3 billion.
“An initial public offering enables a private company to ‘go public,’ or start trading in public markets, by issuing its own shares on a stock exchange for the first time. In this way, any investor can buy shares and the company can raise capital to grow,” Taulli writes in his article, “What Is an Initial Public Offering (IPO)?”.
Caution for Retail Investors
But buyer beware: IPOs can be volatile especially for retail investors. Martin notes that Figma’s decision to do an auction-style offering, which allows it to gauge investor sentiment by requiring limit orders vs market orders, could “reduce extreme pricing volatility,” though “it may also serve to temper a large first-day pop.”
As for individual investors, whether to purchase the Figma IPO is a matter of your personal investing objectives and risk tolerance. If you do choose to purchase shares of FIG stock when they initially start trading, do so in an amount that you can afford to lose and have a trading plan.
