Figma a design software company with customers such as Duolingo, Google and HP,  debuted on the New York Stock Exchange on Thursday with an IPO (Initial Public Offering) of $33 per share. According to Bloomberg, the offering was nearing 40 times oversubscribed in a single day. By the end of Thursday, Figma’s shares closed at $115.50 per share. By Friday, the stock was trading above $120. Figma raised $1.2 billion from its IPO, valuing the company at $19.3 billion. 

What is an IPO? 

An IPO is when a private company first offers its shares a stock exchange. This allows the company to raise capital and transition from private to public ownership. 

Overview 

Figma is currently valued at $19.3 billion, close to the $20 billion Adobe offered to acquire Figma in 2022. This deal eventually fell apart because UK regulators feared that this acquisition would harm competition. The UK's Competition and Markets Authority (CMA) launched an in-depth Phase 2 investigation into the proposed merger, concerned that it would lead to a "substantial lessening of competition in the UK market" before the deal was ultimately abandoned. Adobe paid out $1 billion as a break fee to Figma, strengthening Figma’s balance sheet ahead of its public debut. Figma’s IPO is the largest venture-backed tech IPO since 2021 by the amount raised. 

What is a ‘break fee’? 

This is a fee paid by an acquiring party to a target company if the deal fails to close under certain circumstances, often due to regulatory issues. In this case, Adobe's $1 billion payment compensated Figma for the failed merger. 

What is ‘venture capital’? 

Venture capital refers to companies that have received funding from venture capital firms. These firms are investors that provide capital to early-stage, high-potential companies in exchange for an equity stake. These firms take on significant risk, hoping that a few of their investments will have a large and profitable "exit," such as an IPO. 

How Legal Teams Get Involved 

An IPO is a complex legal process that requires a wide range of legal expertise. Various departments within a law firm work together to ensure compliance and a smooth transition to public listing. 

Fenwick & West was Figma's primary legal advisor. Their Corporate practice group handled the core of their work, but they also drew on expertise from other specialised teams: 

  • Corporate: This team led the IPO, handling the bulk of the work, including drafting the registration statement, ensuring compliance with securities regulations, and advising the company's management.
  • Competition: This department would have been crucial in the lead-up to the IPO, especially after Adobe's failed acquisition due to regulatory concerns from the CMA. Their expertise helped navigate the complex competitive landscape.
  • Technology Transactions: This team would have advised on any intellectual property or commercial partnerships that must be disclosed in the IPO filings.
  • Privacy: This department would have reviewed and ensured that Figma's data privacy policies and cybersecurity measures were compliant and accurately represented in the public filings. 

Latham & Watkins represented the underwriters' syndicate, including major banks like Morgan Stanley and Goldman Sachs.  

  • Capital Markets: The core team advised the underwriters on the offering. They reviewed all of Figma's legal and financial disclosures from the investors' and banks' perspectives to ensure accuracy and protect their clients from liability.
  • Tax: This team advised on the offering's tax implications for the underwriters and ensured that all tax-related disclosures in the prospectus were correct. Employment: This department would have reviewed and advised on the company's employee compensation plans, stock options, and critical disclosures for a public company.
  • Intellectual Property (IP): This team conducted due diligence on Figma's patents, trademarks, and copyrights to ensure the company's IP was secure and that there were no potential legal challenges.
  • Privacy: This team advised the underwriters on any risks related to Figma's handling of data and its cybersecurity posture. 

Future Outlook 

This IPO indicates confidence in the technology sector’s public market appetite after a stagnation. The strong reception for Figma has been called a “bellwether” for other Venture Capital-backed software companies considering going public, such as Canva, Databricks and Netskope. This successful public debut suggests that the market may open up for high-growth, venture-backed companies, potentially paving the way for a new wave of tech IPOs.