Initial Public Offering IPO

Figma’s IPO is a prime example of the heightened volatility and spectacle that often accompanies mega tech listings. Closing its first day at $115.50 per share—a staggering 250% above its IPO price of $33—the company reached a $47.9 billion market cap, nearly double Adobe’s failed 2022 takeover offer. While these numbers raise eyebrows and suggest impressive investor appetite, beneath the surface, some important caution flags are waving.

Such outsized first-day gains have become controversial because they suggest profound mispricing by underwriters, transferring massive wealth from founders and long-term investors to first-day buyers. As Bill Gurley of Benchmark has repeatedly argued, this “archaic process” often leaves significant money on the table, benefitting a few at the expense of the company and its original backers, all while fueling an illusion of demand. Lise Buyer, a noted IPO adviser, points out that such dramatic pops usually reflect “irrational exuberance more than considered valuation,” reminding us that true value should be based on fundamentals, not fleeting euphoria.

In my view, future IPO markets will likely move away from spectacular, underpriced mega IPOs that lack clear long-term profitability and financial predictability. Instead, the next decade’s driving force for public markets will be smaller, substance-driven IPOs. These will emphasize consistent revenue growth, solid fundamentals, and a credible path to long-term profit, establishing a new “small business” asset class among public companies. Investors will reward those who can demonstrate stability and predictability—as we’ve already seen, Chime’s 54% down-round valuation at IPO serves as a warning against relying on hype over substance.

The days when outsized first-day pops and unicorn hype alone drove IPO strategy are increasingly behind us. For public markets and private capital, a sustainable, fundamentals-led approach will provide the stability and returns investors seek—rather than repeating cycles of volatility and mispricing that ultimately benefit only a select few.