Lina Khan points to Figma IPO as vindication of M&A scrutiny
155 comments
·August 2, 2025bix6
alephnerd
Except the majority of the Figma IPO was captured by banks due to it's severe pop. So while everyone made a lot of money, the overwhelming majority went to the underwriters [0].
The founding team at Figma would have gotten a similar amount much sooner if the acquisition was let thru OR if the underwriters didn't screw them over by underpricing at $33.
[0] - https://pitchbook.com/news/articles/figma-ipo-pop-spotlight-...
el_nahual
The IPO "pop" is not captured by banks: it's captured by the banks customers that pre-buy at the IPO price.
Basically, before an IPO, the underwriters take the company on a "roadshow" in which they pitch the IPO to potential buyers.
There's a hierarchy of these: the best are very large buyers that place large orders and trade seldom. Pensions, sovereign wealth funds, etc.
Those buyers then make offers ("I'll buy 50MM at $100"), which the bank uses to set the IPO price. The bank then gives them an allocation.
If you're a high (10MM+) net worth individual that banks with one of the underwriters, you can often get an allocation in an IPO. The richer you are, the more of an allocation you can get.
When an IPO pops, it's these people that get the benefit.
The benefit for the company is that the stock is owned by prime people the bank selected: you crucially _don't_ want to just sell to the highest bidder if they are going to dump the stock immediately after the pop (or that's the theory, at least). They have stable shareholders with a vision aligned with management.
The benefit to the bank is that they get to reward their customers with access to profitable trades--but the bank itself does not profit.
mhh__
This is actually a funny thing for risk mgmt because a trader will say "I want a bajillion shares in this IPO", risk notice it and say "a bajillion!?" not realising that ask for 10x more than you think you'll get allocated.
You also sometimes need to tactically trade with worse brokers so they will feel nicer during an IPO.
SilverElfin
Seems undemocratic. Everyday folks can’t buy even though they would want to
wat10000
Why don’t more IPOs do an auction to set the price? Trying to determine the “right” price ahead of time seems like a really bad way to do things.
conradev
Price discovery is impossible to do except on the market. You can call up everyone you know and ask them, but there are limits to forecasting.
We all knew the Switch 2 MSRP, but we had to wait for launch to see the eBay Buy it Now price.
In this case, the banks are Best Buy. They sold out quickly! Other market players are eBay sellers: the ones that knew what they were doing made a killing selling to consumers.
ptero
An auction for IPO price is much easier to manipulate and can lead to much volatility. Pre-allocating to the entities that are not expected to sell quickly or participate in pump-and-dumps (pension funds, etc.) is considered a better long term strategy for the company, as the sister comment says.
vikramkr
People like it when an IPO pops. It's a good news story and it makes all the banks who participated happy. If it was priced perfectly it'd get reported as the stock was flat, if it's a bit underpriced then you get headlines as the hot new stock that's taking off
vasco
Or in this case, none?
timr
yep. So perhaps don’t block every potential transaction on flimsy pretense? Icing the transaction market seems like a great way to scare off potential competing acquirers in the name of social engineering.
I don’t know. All I know is that Lina is out of power, and suddenly we see an upswing in M&A. Coincidence, I’m sure.
stackskipton
Problem is, by the time she got into power, everyone had consolidated so icing the transaction market was pretty much only outcome.
Lina Khan was entering a market that was deeply flawed thanks to decades of bad policy.
timr
> Problem is, by the time she got into power, everyone had consolidated so icing the transaction market was pretty much only outcome.
That's the talking point, but it doesn't survive even 30 seconds of thought. Yes, the biggest tech companies are very big -- debatably too big! -- but there are easily hundreds of smaller cap companies that you probably haven't heard of who are big enough to acquire startups. If anything those companies are the bulk of the M&A market, and the FTCs actions shut it all down [1].
The problem with the Khan view of the world (IMO) is that it was so fixated on the killing the whales that it didn't realize it was killing the other fish.
[1] By way of explanation: just by the nature of software economics, if you're big enough to make acquisitions in some niche industry, you probably own that industry (or are at least a duopoly player) and are therefore concerned that the FTC will target you.
tptacek
I'm not a Khan fan, like, at all, but by the time you're at the point where the FTC is getting involved in your M&A, you've crossed the threshold of success; all the signals to future startups about your path being promising have been sent.
timr
I disagree. A lot of smaller acquisitions went away during the Khan reign, and from what I was hearing it wasn’t coincidental.
Basically the random and aggressive nature of it was having a chilling effect on all M&A. Why would you go thorough the hassle of a small acquisition (as a buyer) if you knew there was a even a 10% chance that the FTC was going to take an interest?
Spartan-S63
In fact, if future competition is contingent on successful M&A activity, that’s a sign of such deep organizational rot that you either have to radically transform management or ride the company down.
Not everything needs to last and companies that can’t radically transform their management culture to enable innovation and competition deserve to wane until they’re in a steady-state or they go under to allow for a new competitor to rise.
elefanten
I agree with your general point, but Khan was excessively trigger happy in a way that highlights exceptions to your observation. E.g. blocking Meta acquisition of Within was nonsense that did nothing to validate the concept of VR fitness as a promising category (anytime soon)
Edit: Within, not Withings
digitaltrees
Her point is that m&a isn’t the best thing for the economy or founders. Unchecked m&a creates cannibal capitalism where one mega zombie firm scoops up all competition.
neom
An interesting read on this kinda thing in South Korea: https://www.reddal.com/insights/growing-korean-smes-and-star...
refurb
Yet there are plenty of examples of monopoly or near monopoly businesses getting their butts handed to them by startups.
Yahoo, BlackBerry, Kodak, Nokia, Sears.
So it’s clearly not “once you have a monopoly it’s game over for competition”. Markets aren’t stagnant, and as they change it provides opportunities for new competitors to do that “new thing” better than the monopolies.
evolve2k
What a stupid comment at the end of the article. The vindication is of having the company exist in the market in such a way as to encourage competition.
mattmcknight
So blocking a sale at a $20B valuation so the company can IPO at a $19.3B valuation 3 years later (a loss of $700M in value over 3 years) is a success?
boroboro4
Yes? Not everything is about capital owners and their profits. There is a lot of importance in the competition in the market and customers having choice of best products around. Figma competing with adobe is one of the examples.
Even from capital point of view everyone is now forced to make their bet - either on adobe or figma, so it’s more efficient capital allocation too.
mattmcknight
But how is the IPO a sign of success in that case?
alchemyzach
because it means they stayed independent and didnt get absorbed by a major megacorp that is already notorious for trying to corner the market of an entire industry and then over-charging
aurareturn
1. Figma actually lost money because their acquisition price was higher than their shares sold in the IPO.
2. Yes, Figma luckily IPOed in an extremely hot market
Getting a bit lucky doesn't mean this was a success overall. The conclusion has many more years to go before it gets written. Either way, I don't like the over reach by Lina Khan.
franga2000
What do you mean over reach? It's the FTC's job to prevent consumer market consolidation. Adobe is already too big and they already abuse that to the detriment of consumers. Buying Figma would make that even worse.
A company exists primarily to make things for consumers and the FTC ensures they do that fairly. The IPO, stock price and everything else is secondary.
adastra22
They lost money (sort-of) because the market cap was $700M less at IPO. The amount of shares sold in IPO is irrelevant.
I said sort-of because the economics of this is more complicated. Investors lose their preferences when they sell in an IPO, so this is probably better for common stock holders.
cogman10
Remember when HP bought palm and them proceeded to lay off the entire palm staff and kill all the palm products?
The market works best with competion. It's better for the workers, the customers, society and innovation in general.
A giant monopoly buying potential competitors is bad for everyone other than owners of that giant monopoly.
andy_ppp
Why would Figma have sold to Adobe if they were not paying a premium, assuming they’d grow?
I can understand you looking at the headline valuation but as an independent company traded with lots of potential to grow with AI tools their stock will probably double… a quick Google appears to suggest a 250% uplift from the IPO price so the company would potentially have added $58bn (the figure I’ve seen quoted) to Adobe’s bottom line.
Lina Khan was right at least on this merger!
svcphr
Its market cap is about $58b right now. Tripled in three years!
mattmcknight
But the company only sold the shares at $19.3B.
snowwrestler
But they also only sold a very small number of shares at that valuation, vs all of them at $20B to Adobe.
cogman10
Right, which gave them 19B (ish) to play with and they are an independent competitor to Adobe.
Mergers trigger layoffs
dv_dt
If they have to issue shares the higher valuation is significant
tkzed49
Yeah, because now it's not owned by Adobe, who are tanking their own stock price.
landl0rd
I’m not especially in favor of all of Khan’s actions but this was an accretive acquisition prospect for Adobe in a way that makes it worth more to them vs as a standalone company. Think how Urchin Analytics was worth a lot to Google but less by itself.
Also, Adobe was massively overpaying, arguably even if you consider that. Even if you assume it was due to seeing Figma as a huge competitive threat the stock nosedived due to the acquisition price.
mandevil
IPO valuation is pretty much always set to undervalue so it gets a good pop(1). The market cap after 90 days of trading (generally speaking when insiders lock-up provisions expire and there is no longer a limit on the number of shares that can be sold) is a much better estimate of the actual value of the company. We don't have that yet, but right now the stock is ~3x the valuation that Adobe was going to buy at. Every equity owner is currently booking this as a win. We'll see what the price is when the lock-out provisions end, but right now definitely the shareholders are glad that they didn't merge.
I know that because if the metric you cite was something that the investors and managers cared about, they could have done other things to boost it (see footnote 1). They didn't, ergo they don't consider that metric to be a useful gauge of the company value. It sure looks like you tried to find the worst performing metric to claim that there was a loss, when so far this has been a major win for the shareholders(2).
1: If you don't want this and want to IPO at the highest valuation, you do a direct listing like Spotify did, or a SPAC reverse merger like Trump Media did. But there are reasons that the vast majority of companies choose to do a traditional IPO. For most companies, this is a one-time transaction that will make the managers very very rich, and they want to get the best guidance on navigating it- and are willing to pay handsomely for that guidance, since this is the only time in their lives they will be CEO for a major company that is starting to list. So they follow the IPO/greenshoes/pop route.
2: The most important nuance on that statement is that it took them a year and a half to extract that extra value by doing an IPO, and now they are exposed to market risk. We will have to see what the market conditions are like in another few months when the lock-ups expire.
zaptheimpaler
The IPO only sold a few percentage of their shares. Even if we assume they sold all of them at opening price, by close the company and employees still hold like 80% of their shares that are worth triple what Adobe would have paid. Besides, antitrust is also about consumers, not JUST about businesses. We will all benefit immensely from real competition instead of having Adobe continue to dominate the market. We're talking about Adobe FFS, they have some crazy prices and shitty dark patterns around trials & cancellations.
steveBK123
More companies going public, earlier is better for markets and society.
Having companies stay private growing from 0 to 100B value allows VC bros to capture all the growth and then unload onto the public via IPO or selling to a larger BigTech firm.
devmor
If you mean specifically the case of VC companies, this is true. I think the opposite is the case when we’re talking about “naturally grown” companies that didn’t take on serial investor money.
chii
> then unload onto the public via IPO
this implies they're unloading at a valuation that is higher than it is worth. If so, why do "the public" make the purchase?
oooyay
My experience with mergers and acquisitions is that it's akin to keeping a warm body on life support. When I worked at a company that did a lot of M&A I was sitting around like, "Why couldn't you have just built that?" When I worked at a company that was recently acquired and went through the merger process I was like, "wow I see why you bozos would've never built this yourselves." That isn't to say there aren't companies that do them well or there aren't places where it makes sense in an ultra-competitive landscape but I'm curious - when was the last time anyone really considered tech an ultra competitive landscape?
Post-2015 other than large language models this industry has mostly been riding on intellectual property consolidation. That's basically Lina's point; nobody actually benefits from this - not customers, not share holders, not the American people. The over practice of M&A leaves a small pool of winners who are not the kind of people that post on or read this forum.
delfinom
The only ones that benefit are the executives from temporary boosts of revenue numbers hitting targets for their bonus payouts.
msgodel
>nobody actually benefits from this
The secondary market drives the primary market.
braiamp
If you mean the ones transacting in derivatives, no, they don't. The US market isn't India where the size of the secondary market was bigger than the primary market. If you mean that financial markets drive real markets, that's also wrong. While yes, certain products need a infusion of cash to get to market, that's not the same as having a company acquire the possibility of a new product and just sit on it.
unmole
You could just look up what primary and secondary markets meant without speculating and chiming in with irrelevant takes.
Invictus0
[flagged]
rcxdude
Buying a company for its customer base is rarely good for the customers, though. That's the main point, I think. Why should society allow someone to take control productive entity simply so they can extract more value from it? There needs to be some value for the customer or the public as a whole for that to be a good thing.
monero-xmr
If I build a company I should be able to sell it to whoever I want for any reason. It’s my company
zenmac
Not for no reason at all, just not economical or innovative or supporting the customers.
It is all a dog and pony show now to chase the investors while centralize and concentrate wealthy in the hands of very few.
Edit: do think we ought to promote using Penpot type of alternative to proprietary counter part.
brettgriffin
M&A deals are analyzed pretty closely and there (usually) has to be a convincing argument that it is economically or strategically accretive to the acquirer. It's easy to call them all morons from afar, but I think it just highlights how difficult it is to pull off successfully. And when it is successful, it's always an obvious no-brainer in retrospect.
Anecdotally, I know someone that spent two years intentionally sabotaging an M&A deal that would replace his internal product and team in a company. He and his colleagues were successful and everyone thinks the acquirer was a dumbass for doing it, but with more knowledge about the misaligned incentives it starts to become more clear.
vasco
[flagged]
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tobinfekkes
In context, Lina Khan didn't have authority to regulate non-American entities.
grandmczeb
So what is iRobot’s bankruptcy evidence of?
klooney
The fact that Chinese dominance in the world of atoms made its position untenable.
sealeck
That if Amazon acquired it, this would enable it to horizontally integrate and take control of yet another market? This, eventually, woudl lead to lower prices for consumers...
bryant
> This, eventually, woudl lead to lower prices for consumers...
What incentive would Amazon have to drop prices after vertical integration is done?
tomrod
Economies of scope are the common claim.
bee_rider
This is sarcasm, right? The “eventually,” the ellipses, and the underlying ridiculousness lead me to believe it is sarcasm.
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conscion
That Amazon wasn't acquiring it for it's business acumen and was actually acquiring it for some secondary purpose (i.e. market consolidation, data extraction)
CamperBob2
Evidence that you can only coast for so long on patents. Eventually you have to get back to work and provide value to customers.
zombiwoof
People don’t remember the hellscape of computing when Microsoft was an unchecked monopoly
SilverElfin
Aren’t they basically the same now, unchecked in power? They’re able to muscle into anything using their money and incumbent strength. They can use existing products to sell new ones. They can copy products and give them away. They can wage legal wars.
Personally, I think it’s unacceptable to have any business worth 4T as a single company. It’s not good for competition and for customers in the long term. But today’s anti competitive tactics are different from the simpler monopolistic tactics of the past. We need all new regulations to deal with it.
xyst
"Embrace, extend, and extinguish" days will never be forgotten. One of the primary reasons I have always had disdain for MS.
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siliconc0w
It's a fair point but it's easy to say it after the fact- there was no guarantee of a better outcome.
root_axis
She was instrumental in blocking the acquisition by Adobe, obviously her claim at that time was that it would lead to a better outcome.
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Sherveen
Everyone in this thread who posts some variation of "wow love it how the government gets to decide if you get to sell your startup or how the market should work" should be handcuffed to their chair and forced to answer these 3 questions:
1. is there any role for gov't antitrust in your view of modern capitalism? 2. if there is a role, why is Adobe x Figma not the perfect example for enforcement? 3. if your answer is "Adobe clearly isn't a monopoly, look at the existence of Figma as evidence," why are you dumb?
Spooky23
Keep in mind that this is a forum run by a company that is a funnel for new VC companies and most people are in adjacent places in tech,
Principles don’t pay the mortgage.
founders would ultimately benefit from “a world in which you have six or seven or eight potential suitors” rather than “just one or two.”
Real talk Lina