Down 84%, Is It Time to Give Up on This IPO Stock?
Written by Justin Pope for The Motley Fool -> AI fears and a steep post-IPO valuation have haunted Figma stock. But the company's business is accelerating amid AI adoption. The stock looks ready for an impressive comeback story. Figma (NYSE: FIG) was one of the hottest IPO st
AI fears and a steep post-IPO valuation have haunted Figma stock.
Figma (NYSE: FIG) was one of the hottest IPO stocks of 2025 after Adobe had agreed to acquire the company for $20 billion, but abandoned the deal amid regulatory scrutiny in late 2023. Investors who had jumped into Figma stock looking for a big score have gotten nightmarish returns instead.
Shares of Figma have continued to grind lower since the company's IPO, and now sit 84% below their short-lived peak. Figma is far from the first IPO stock to burst onto the scene only to go up in flames. But before giving up on this IPO stock, consider the company's recent performance and what it could mean for the stock's future.
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A high-profile IPO stock is going to carry a steep valuation almost every single time. The goal of an IPO is to raise as much money for the business as possible, whereas an investor wants to get as much value as possible for the money they put into a stock.
Figma is an innovative software platform for designing digital interfaces, such as websites, apps, and content. The botched Adobe deal only drew more attention to Figma, which traded at 60 times sales after going public.
But high valuations can easily collapse at the first sign of trouble. Many hot IPO stocks cool off once the hype quiets down. That downfall can begin with a poor earnings report or some other catalyst. In Figma's case, the rapid improvement of artificial intelligence, such as LLMs (large language models) like Claude, sparked a bear market among almost all software stocks. Investors feared that AI would threaten, if not replace, most software products.
The company grew sales by 46% year over year in the first quarter of 2026 to $333.4 million, accelerating from a 40% growth rate in the prior quarter. Figma's net revenue retention rate increased by 3% to 139%, its highest in two years. That means that Figma's users are spending more as they use the product more.
