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Figma proved today that being a successful public company is a marathon, not a sprint.
Shares plunged 19.93% after Figma’s first-ever earnings announcement—making today its worst day of trading since its IPO in July.
On the surface at least, Figma’s debut earnings weren’t terrible. In fact, revenue jumped 41% to reach $249.6 million, slightly above analyst expectations. But Figma forecasts Q3 revenue to come in between $263 million and $265 million—just a 33% year-over-year increase, marking a serious growth slowdown from last quarter.
Part of what’s spooking investors is just how high expectations were for the design startup out of the gate. Shares of Figma jumped a staggering 250% in its market debut, giving the company an unrealistically high bar. Since its IPO, shares of Figma have sunk nearly 36%.
But there’s another factor that’s putting pressure on the company: Figma also disclosed that September 5 (tomorrow) marks the end of its lock-up period for Early Release Shares.
A lock-up period is the 90 to 180 days after a company goes public when pre-IPO shareholders aren’t allowed to sell their stock. But tomorrow, the 25% of Figma shares that are held by certain employees and early investors will flood the market all at the same time, and inevitably pushing Figma’s share price lower.
Designing a bullish future
Analysts are also wary of another headwind: Generative AI, which could pull market cap away from design tools like Figma.
“We continue to see Figma's platform well positioned to address the consolidation of workflows and users involved in design, but expect the pace of penetrating into the opportunity to take time given the recent roll-out of new products and preference to drive broad adoption of GenAI tools before monetization,” Morgan Stanley analyst Elizabeth Porter wrote in a note today. She also lowered her price target from $80 down to $70, which is still 28% higher than shares trade now.
Maybe Figma can draw a brighter future?—LB