By Paul R. La Monica

Figma stock took off like a rocket when the software design company went public six months ago.

On the first day, shares soared 250% -- to $115.50 from their initial price of $33. The price popped again on day two, to $122, pushing the company's market valuation as high as nearly $60 billion.

It has been all downhill from there. Figma now trades at roughly $29.20 a share, an 80% plunge from its all-time high of $142.92, and more than 10% below its $33 IPO price.

Figma's spectacular collapse is a warning to not get caught up in what can be considerable hype for IPOs.

Today, the company's market cap hovers around $14.5 billion. To put that number in perspective, rival Adobe offered to buy Figma for $20 billion in 2022. The companies abandoned the deal a year later because they weren't confident they could get the signoff from regulators.

But Figma's struggles are tied to more than just hype. It's about AI, too, despite partnerships with ChatGPT creator OpenAI and Google Cloud/Gemini owner Alphabet.

Wall Street is worried that artificial intelligence will eventually make big software firms obsolete. Adobe shares are in the tank, too.

The worry is about the rise of so-called vibe coding, the use of AI language prompts to generate software applications. Figma has its own vibe coding product called Figma Make, but even that hasn't calmed analysts.

There are "concerns about competition from AI and AI-native coding platforms such as Lovable, Replit, and Vercel," Rishi Jaluria, an analyst with RBC Capital Markets, told Barron's.

Jaluria, who has a hold rating on Figma, added that "OpenAI and Anthropic continue to build more functionality into their platforms."

The intense competition is particularly a problem considering how expensive the stock still is. Even after tumbling from its post-IPO highs, Figma shares trade at more than 110 times earnings estimates for this year.

"The valuation reached high levels right after [the] IPO and with that comes inflated expectations," Jaluria told Barron's. "As a public company, they have executed well, in my view, but maybe no number is high enough at those multiples."

Figma's financials are fairly healthy. Revenue grew 38% from a year ago in the third quarter.

But Jaluria isn't the only one on Wall Street who's skeptical of the valuation. Of the 12 analysts who cover Figma, eight rate the stock a hold, three mark it a buy, and one says sell.

Interestingly, though, the consensus price target is $47.56, nearly 65% higher than what shares are trading at today. That suggests the analysts who are lukewarm on the stock will either need to lower their price targets or upgrade their ratings.

Still, even a price near $48 is well below its all-time high. And Figma isn't the only high-profile IPO that has dropped precipitously since its market debut.

Crypto firm BitGo has fallen 25% since going public last week. Robo-advisory investment manager Wealthfront is down nearly 40% from its December IPO price. And StubHub, buy-now, pay later fintech Klarna, and Fermi, a real estate investment trust, are other late 2025 debuts that Wall Street now considers busted or broken offerings since their stocks are below their initial prices.

The poor performances raise the question: What will this year's IPO market bring? Strong debuts and steady performances? More hype and AI jitters?

Only crystal-ball gazers can give any answer with a measure of confidence.

But those of us who aren't fortunetellers simply give this advice: Be careful. Not every new offering is going to be able to build on its first-day gains.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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January 26, 2026 14:49 ET (19:49 GMT)

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