Activity in the initial public offering (IPO) market is accelerating following a spring freeze. According to Renaissance Capital, there have been 123 IPOs priced this year through July 31, a 48% increase from the year prior.
Total proceeds from this year's filings are down 15% year over year to $19.7 billion.
This year's biggest IPOs include stablecoin issuer Circle Internet Group (CRCL) and CoreWeave (CRWV), an artificial intelligence (AI) cloud company, which raised $1.05 billion and $1.5 billion, respectively, in their offerings.
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And following in the footsteps of these successful offerings is Figma (FIG), a design software company and former Adobe (ADBE) acquisition target, which had its own blowout market debut on July 31.
After pricing its offering at $33 per share on July 31, well above its initial range of $25 to $28 per share and its upwardly revised range of $30 to $32 per share, Figma raised $1.2 billion in its IPO.
Shares of Figma, which trade on the New York Stock Exchange, opened on Thursday at $85 per share. They hit an intraday high of $124.63, before closing at $115.50.
"Investor demand for Figma has proven to be incredibly strong, with shares reportedly oversubscribed by more than 30 times," says Greg Martin, managing director at Rainmaker Securities.
This elevated demand for the shares "suggests long-term confidence in Figma and a view that their independence in the wake of the Abode deal collapse was ultimately beneficial, allowing Figma to accelerate their AI innovation while expanding their product line," Martin adds.
Preliminary results for Figma's second quarter show a 40% year-over-year rise in revenue at the midpoint of its expected range.
It also expects non-GAAP operating income to arrive between $9 million and $12 million vs $4.9 million in the year-ago period.
In Q1, the company saw revenue jumped 46% year over year and generated net income of $44.9 million. As of March 31, it had 13 million active monthly users, and 95% of Fortune 500 companies are customers.
What is Figma's valuation?
In 2022, blue chip stock Adobe agreed to buy Figma for $20 billion, but the acquisition was called off as regulators in the U.K. expressed antitrust concerns.
Shortly after the deal fell through in late 2023, Figma reset its internal valuation to $10 billion.
Based on its offering price of $33 per share, Figma's IPO valued the company at roughly $19.3 billion. However, the FIG finished Thursday with a market cap of $47.1 billion, putting it in the same neighborhood as fintech Block (XYZ).
Should you buy FIG stock?
"An initial public offering enables a private company to 'go public,' or start trading in public markets, by issuing its own shares on a stock exchange for the first time. In this way, any investor can buy shares and the company can raise capital to grow," Taulli writes in his article, "What Is an Initial Public Offering (IPO)?".
While IPO stocks tend to have strong first-day showings, returns for the first year are generally weak, says the team of analysts at Trivariate Research, a market research firm based in New York.
As for retail investors, whether or not you buy the Figma IPO comes down to your own risk tolerance and personal investing goals. If you do decide to buy shares of FIG stock when they first begin trading, do so in a small amount that you can afford to lose and have a trading plan in place.
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