Figma’s Auction-Like IPO Set Up to Capitalize on Strong Demand

(Bloomberg) — Figma Inc. is running its IPO more like an auction than a traditional listing, in an effort to wring the most out of its highly anticipated public debut.

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The San Francisco-based company is asking prospective investors in its initial public offering to precisely state the number of shares they wish to buy and at what price, according to a person familiar with the matter. Figma and some of its backers are seeking to raise as much as $1.03 billion in the listing.

Though numerous tech companies including DoorDash Inc. and Airbnb Inc. deployed the approach in their debuts during the Covid era, capitalizing on the frenzied dealmaking that drove IPO volume to record highs, it fell out of favor as the market slowed. Its re-emergence may be a sign that the US IPO market is heating up once again.

“Figma wants to show that it is a hot deal and encourage the right investors to pay up for it, and right now they are the only game in town,” said David Erickson, adjunct professor of business at Columbia Business School and a former co-head of global equity capital markets at Barclays Plc.

Investors seeking to participate in typical IPOs submit market orders, which are settled at the best available price. For hot tech IPOs like Figma’s, some investors submit jumbo orders with no specific price limit, in the hope of getting a large allocation. Such tactics can inflate the apparent level of demand for shares, potentially making it harder for bankers to settle on an offering price.

Figma’s approach of requiring limit orders is designed to give the company more granular information on what investors believe the stock is worth, the person said, asking not to be identified as the information isn’t public.

The design software firm’s IPO is expected to price on July 30, Bloomberg News has reported. The structure was first reported by International Financing Review. A spokesperson for Figma declined to comment.

An auction-like process may theoretically have allowed a company like Circle Internet Group Inc. to capture more of the hidden enthusiasm for its stock that was revealed after its IPO priced in June. The stablecoin issuer’s shares skyrocketed 168.5% in their debut session and are now more than 500% above the IPO price — implying that many investors would have paid more than the $31 per share set prior to its trading debut.