Figma's IPO Volatility: A Historical Lens on Stock Splits and Valuation

Figma's journey since its July 2025 debut has been a textbook case of post-IPO volatility. The stock listed at $33 a share and exploded, hitting a first-day high of $142.92 the next day. That's a pop of over 300%. Yet the rally proved fleeting. By early January, the stock had given up nearly all those gains, closing at $37.33-a price that left it down about 75% from its peak and barely above its IPO level.

This dramatic swing has left the company's valuation in a precarious spot. At that price, Figma carries a market cap of $18.5 billion, implying an enterprise value of roughly 13 times its trailing sales. The debate around the IPO's mechanics has only intensified. Prominent venture capitalist Bill Gurley has called the traditional model a "broken system," arguing it systematically rewards institutional buyers who flip shares at a discount while the company and its builders get a relatively modest cash raise. Figma's choice of a conventional IPO, rather than a direct listing, has become a focal point. Critics suggest the company may have prioritized some guaranteed proceeds and market support over maximizing the total capital raised, a trade-off that now leaves it with a sky-high valuation to justify.

The aftermath has been a study in conflicting signals. On one hand, the stock's collapse from its highs has punished early investors who couldn't sell. On the other, the company's fundamentals have held up; revenue grew 38% last quarter, and it remains profitable. The disconnect between strong operational results and weak stock performance highlights a market that is demanding perfection from a company now valued at a premium. The episode echoes past tech debuts, like Snowflake, where a massive first-day pop failed to hold, leaving insiders and employees with a painful reminder that initial price levels are just one data point in a much longer story.

Historical Parallels: Post-IPO Volatility in Tech IPOs

Figma's rollercoaster is not an anomaly. It follows a well-worn path for high-profile tech IPOs, where an extreme first-day pop is often followed by a deep drawdown as the market recalibrates. The pattern is clear: the stock listed at $33 a share and jumped to a high of $142.92 the next day. That initial euphoria, however, proved unsustainable. Over the following months, Figma gave up nearly all those gains, leaving it down about 75% from its peak. This mirrors other notable debuts, like Snowflake, where a massive pop failed to hold, and Spotify, which also saw its price collapse after a strong start. The common thread is a market that initially prices in perfection but then demands proof.

The aftermath is a period of intense price discovery. The stock's volatility forces a reckoning between lofty valuations and tangible growth. For Figma, this means weighing its 38% revenue growth and profitability against the high bar set by its post-IPO valuation. The market's reaction has been mixed, with the company's reported earnings twice disappointing despite strong results. This tension-between operational strength and valuation pressure-is the crucible where a stock's true worth is tested. It's a process that can take months or even years, as investors sift through competitive threats, product pipelines, and macroeconomic headwinds.

The conclusion from this historical lens is that extreme volatility is a common feature of high-profile tech IPOs. It's often a necessary phase, clearing the air after the initial hype and setting the stage for a period of consolidation and fundamental validation. The initial pop rewards early buyers and creates a high-water mark, but the subsequent correction is when the real work begins. For Figma, the current price, while still a premium, may represent a more rational starting point for that validation process. The company now has the runway to demonstrate that its investments in AI and expansion into new areas can justify its market cap, moving beyond the noise of its volatile debut.

Stock Splits: Mechanics and Historical Precedents

The mechanics of a stock split are straightforward. It is a corporate action where a company increases the number of its outstanding shares, proportionally reducing the price per share. The total value of the company and an investor's portfolio remain unchanged. For example, a 2-for-1 split would double the number of shares held while halving the price per share. The primary stated purpose is to make the stock more accessible to retail investors by lowering the per-share barrier. Yet, as the evidence notes, stock splits have no tangible impact on a company's total value.

This structural reality is key to testing the "Figma next" hypothesis. The idea often floated after a stock's dramatic rise is that a split will be the catalyst for the next leg up. But history shows this is not a guaranteed formula. Forward splits are typically associated with strong growth narratives and high share prices, but they are a response to past appreciation, not a driver of future performance. As one source explains, companies tend to implement forward stock splits when the outlook for continued growth and profitability is strongest. The split itself is a signal of confidence in the company's trajectory, not a cause of it.

Looking at the tech sector, the pattern is clear. Notable splits, like Apple's 7-for-1 split in 2014, occurred after sustained periods of high price appreciation and market dominance. They were not tools deployed during the extreme volatility of a post-IPO correction. Figma's current situation is the opposite. The stock has plunged from its highs, trading at a price that is under $40 and far from the psychological barrier that typically triggers a split. The company is not in a position of high price appreciation; it is in a phase of price discovery and valuation reset.

Therefore, the historical precedent argues against an imminent split for Figma. The mechanics are simple, but the timing is what matters. A split is a feature of a mature, high-flying stock, not a distressed one. For now, the focus should remain on the company's fundamentals-its 38% revenue growth and profitability-as the true determinants of its path forward. The split narrative, while common in the hype cycle, is a distraction from the more critical work of validating its premium valuation.

Valuation and Investment Thesis: Beyond the Split

The debate over a stock split distracts from the core investment question: does Figma have a durable business and a reasonable valuation? The answer hinges on its growth trajectory, competitive position, and the true cost of its premium price tag.

The company's growth remains robust. In the first nine months of 2025, revenue surged 41% year-over-year to $752 million. This acceleration points to a large and expanding addressable market, estimated at $33 billion. For context, that means Figma's current sales are still a small fraction of its potential, suggesting significant runway ahead. This growth is powered by a real-time collaborative platform that has become the de facto standard in design. Its freemium model acts as a powerful flywheel, drawing users into its ecosystem before converting them to paying customers. The platform's dominance is so entrenched that even Adobe attempted a $20 billion acquisition, a testament to its strategic value.

Yet this moat faces a clear risk. Adobe is now a direct competitor, and the design software market is inherently competitive. The company's success is built on user familiarity and network effects, but those advantages can erode if rivals innovate faster or offer better pricing. The investment thesis, therefore, is one of high conviction in Figma's execution, balanced against the constant threat of competitive pressure.

The stock's recent price action further complicates the picture. While the share price has gained 13% since its IPO, that figure is misleading. As the evidence notes, you would have had to have been an insider to benefit from that. For the broader market, the story has been one of a severe drawdown. The stock's plunge from its $142.92 high leaves many investors deeply underwater. This disconnect highlights a key point: the stock's valuation is not a simple function of its price. At a market cap near $19 billion, the stock trades at a steep price-to-sales ratio of 19. This premium demands flawless execution and sustained hyper-growth.

The bottom line is that Figma's investment case is a high-stakes bet on its growth narrative. The fundamentals-41% revenue growth, a massive TAM, and a strong competitive position-support the premium. But the valuation leaves little room for error. For new investors, the current price near $37 may offer a more rational entry point than the IPO's inflated levels. However, the path forward will be defined by whether the company can translate its market leadership into the kind of consistent profitability that justifies its lofty multiples. The split is a sideshow; the real test is in the financials.

Catalysts and Risks: What to Watch

The path forward for Figma is defined by execution, not mechanics. While the split debate captures headlines, the real catalysts and risks are embedded in the company's financial performance and strategic moves.

The key catalyst is sustained execution on its growth strategy and a clear path to profitability. The market has already priced in a premium, so Figma must deliver on its 41% revenue growth and demonstrate that its heavy AI investments are translating into long-term value. The company's recent moves-launching tools like Figma Make and Figma Buzz, and acquiring Weavy to bolster its AI capabilities-show it is acting decisively. The validation of its current valuation multiple hinges on quarterly results that show not just top-line acceleration, but also improving margins as it scales. In other words, the stock needs to prove that its growth story justifies its price-to-sales ratio of nearly 19.

The major risk is continued price volatility and the potential for dilution. The IPO's broken system left the company with a sky-high valuation to live up to, creating a persistent pressure for flawless results. This dynamic can fuel further swings. More concretely, the company may need to raise capital in the future, either through secondary offerings or strategic financing tied to its partnership with Adobe. Such moves could dilute existing shareholders. The volatility from the IPO debut is a warning: when a stock is priced for perfection, any stumble can trigger a sharp repricing.

The recommendation is clear. Investors should monitor quarterly revenue growth and margin trends more closely than any potential split announcement. The split is a historical footnote, a signal of past appreciation, not a driver of future performance. What matters is whether Figma can consistently meet or exceed the high bar set by its post-IPO valuation. The stock's stabilization near $37 offers a more rational entry point than the IPO's frenzy, but the runway to profitability remains steep. The focus must be on the financials, not the mechanics.