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?
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.
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
They were independent the whole time and it wasn't considered a success. I suppose IPO is an indicator they might stay independent longer. Now that they are in the public markets even Adobe can buy a few shares. I just don't feel like the IPO event has brought any particular benefits to the consumer and Khan is incorrectly looking at post IPO stock price bounce as some kind of financial indicator that it was a better deal for the company.
There is a third option. (According to some LLM that will remain unnamed Vungle, Wrike, and Acquia are textbook cases of direct VC‑backed startups being bought out by private equity without an IPO or corporate acquisition. Not verified.)
Figma is a web app. Web apps are fundamentally a hyper-competitive market because literally anyone can just throw something up on the internet if they think there is a need for it. The risk here of Adobe overcharging for it is rather low - someone would build a cheap clone.
People keep coming up with theories that companies are about to corner the market then over-charge, but the theories vastly outnumber the cases where it ever happens in practice. It is almost always that the biggest companies in the market are just more competitive (lower prices or higher quality) than all the others.
That is not what would happen. Figma has built a huge moat through its brand by now, and most customers would continue to use it; some of them probably already have an Adobe subscription anyway, so Adobe would naturally try to make it easier or more integrated for these customers.
A clone would need to start from scratch and compete against a huge corporation with virtually unlimited funds.
> It is almost always that the biggest companies in the market are just more competitive (lower prices or higher quality) than all the others.
That is almost always not what is happening. The big players extinguish any would-be competition early by buying them or throwing sticks into their wheels. They can afford to strategically make a loss in a given area to underbid the competition by overcharging in others, or relying on synergies. There are numerous examples where small teams built highly qualitative alternatives to corpo stuff, but had to compete against the network effects and brand names instead.
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.
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.
It's not arbitrary, there are many reasons to block the merger and they were explained in depth when the decision was made.
Also, the EU and UK also made it clear they were against the merger. In fact, if you look at most reporting, the EU and UK seem to be the main reason they gave up, presumably because they know the US FTC has no teeth, even with a competent chair.
Even if EU and UK wanted to block the deal, it doesn't make it the right thing to do. Free market.
I don't have a popular opinion on HN. I don't think Google should be broken up because new technology has made Google search much less needed. I don't think Apple should relinquish control over its app store because it's Apple's platform and they should do what they want. I don't think Adobe should be stopped from buying Figma because even if Adobe buys it, maybe some rich ex-employees might quit and make another competitor or make an open source alternative. Who knows.
People on HN wants the government to weaken tech companies but not when it's the tech company they're working in.
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.
I don’t think 19.3 B is their current market cap, it’s only what was sold at the IPo. Anyway, 19.3 instead of 20 would have been no big deal IMO
Adobe certainly lost money, because they have had to compete against the better product, so have been able to charge less for their own offering. And will presumably continue to do so until further notice.
Any employees who would have been swiftly laid off after the acquisition should certainly be glad for this outcome. They still have jobs, and if there are layoffs after the IPO it will be less dramatic. If they had equity, they probably got a much better deal in an IPO, especially if they sold some of it off after the “pop”.
Figma raised $1.2B in their IPO. Total shares listed != money raised, not by a long shot. Most shares are just to give liquidity to existing shareholders of the company.
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.
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.
We'll see but post-IPO their valuation is $58b, so it's not clearly wrong
But also as you said this is 3 years later, which is a long time in the tech business and all sorts of things have changed, positive and negative... so she's not clearly right either...
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.
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.
You do not understand how IPOs work. They only sold a small number of shares (about $1.2B) in the IPO. That’s why it’s called an “initial offering” of shares.
Investors can feel free to hold onto their remaining shares and sell whenever they want, outside of a window following the IPO where they can’t.
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.