So, the Figma IPO was yesterday and boy did it go well…or so you would think. The IPO shares consisted of 12.47 million shares from the company to raise funds and 24.46 million shares from Index Ventures, Greylock Partners, and Kleiner Perkins, their biggest VCs.
What happened is going to be talked about for a while. There were reports the IPO was oversubscribed by up to 4000%. However, these IPO shares were priced at $33.
But the stock opened at $85 and closed today at over $120.
That’s…..not how this is supposed to work.
See, the company and its investors only got the benefit of the $33 and lost out on all the remainder of that value. This points to the IPO being massively underpriced. How price is determined is a complex process, but the underwriting banks must have known they were wrong since it benefits their institutional clients to price an IPO low.
The biggest problem is that collectively, by having the IPO price be so low, the VCs lost out on over $20B in gains if they had only waited a single day. That would have dramatically changed the results of their return on their portfolios.
My guess is since big name VCs were screwed over by the banks some lawsuits will fly. I bet the champagne bottles weren’t even empty before VCs started getting furious about leaving so much money on the table.
Meanwhile, Boomberg reports the co-founder and CEO of Figma is now worth $1.8 billion. It’s a little painful to see that he owned so little of the company by the end with all the biggest investors taking most of the money for themselves. Although the employees are making more than they ever dreamed of right now. For once a lockup period is working in their favor!
Will be very interesting to see the fallout from this.