Figma Aims to Raise $10.3 Billion in Auction-Style IPO

Figma, a design software company, is set to go public using an auction-style IPO mechanism, a strategy that was previously employed by companies like DoorDash and Airbnb during the pandemic. This approach, which requires potential investors to specify the exact number of shares they wish to purchase and the price they are willing to pay, aims to maximize returns in a highly anticipated public offering. The resurgence of this strategy indicates a warming U.S. IPO market and a growing demand for high-quality tech stocks.

On July 23, it was reported that the San Francisco-based company and its supporters aim to raise up to 10.3 billion dollars through this IPO. By requesting limit orders instead of the traditional market orders, Figma seeks to gain more accurate stock valuation information. This method, though used by several tech companies during the pandemic, had fallen out of favor as the market slowed. Its reappearance suggests that investor appetite for quality tech stocks is on the rise.

The auction mechanism is designed to provide more precise pricing information. In traditional IPOs, investors submit market orders, settling at the best available price. For hot tech IPOs like Figma's, some investors submit large orders without specific price limits, hoping for significant allocations. This can inflate the apparent demand for the stock, making it harder for bankers to set the issue price. Figma's limit order requirement aims to give the company more detailed information about what investors believe the stock is worth, potentially capturing more hidden investor enthusiasm.

For instance, Circle Internet Group Inc., a stablecoin issuer, saw its stock surge 168.5% on its first trading day post-IPO in June, with the current price more than 500% higher than the IPO price of 31 dollars per share. This indicates that many investors are willing to pay more than the initially set price. For Figma, this strategy could help the company approach the 20 billion dollars valuation that Adobe agreed to in 2022 before the acquisition was abandoned due to regulatory concerns at the end of 2023.

On July 21, Figma released its latest prospectus, planning to issue approximately 37 million shares with a price range of 25 to 28 dollars per share. At the upper limit of the price range, the IPO could raise up to 10 billion dollars, valuing the company at 164 billion dollars on a fully diluted basis. The IPO is expected to be priced on July 30, with the company's shares set to trade on the New York Stock Exchange under the ticker symbol FIG. The underwriters for Figma's IPO include Morgan Stanley, Goldman Sachs Group, Allen & Co., and JPMorgan Chase & Co., reflecting the high level of market interest and expected demand for the offering.