Figma stock falls from $122 to $94.50, wiping out nearly all IPO gains

Figma’s honeymoon on Wall Street just ended in a freefall after mere days. On Monday, the company’s stock collapsed by 23%, sending its price tumbling from $122 on Friday to $94.50 by midday.

The $27.50 drop crushed nearly all the gains it made after its explosive IPO debut just last Thursday. The sharp fall came just four days after Figma and its biggest shareholders sold 37 million shares at $33 each, raking in around $412 million for the company.

The stock had opened with massive demand and more than tripled during its first trading session on the New York Stock Exchange, showing just how hungry investors were for high-growth tech names. But by Monday, that demand disappeared fast.

Wall Street enthusiasm fades as economic warnings pile up

While Figma told investors in its IPO filing that it expected second-quarter revenue to climb 40% year-over-year, and despite being consistently profitable, a rare trait among recent tech IPOs, that wasn’t enough to protect it from the broader market shakeup.

Figma now carries a diluted valuation of about $56 billion, which is nearly three times what Adobe offered in 2022 to buy the company. That deal never closed. Regulators in both the U.K. and the European Union objected, and the companies officially canceled the agreement in late 2023. At today’s price, Figma’s CEO, Dylan Field, age 33, still controls shares worth more than $5 billion.

While Figma was sinking, big-name analysts were sounding alarms. On Monday, strategists from Morgan Stanley, Deutsche Bank, and Evercore ISI each warned of a potential pullback in the overall market. After a three-month rally that pushed the S&P 500 Index to new records, those same firms are now telling clients to prepare for drops.

Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, predicted a 10% correction before the end of the quarter. He blamed pressure from tariffs and tighter corporate balance sheets, writing, “Over the last couple of weeks, we have noted that investors should expect a modest pullback in the third quarter.”

At Evercore, Julian Emanuel gave an even sharper forecast, warning of a possible 15% slide. And Parag Thatte, who leads Deutsche Bank’s U.S. equity and global asset allocation team, said markets are overdue for a breather after surging nonstop for months.

Weak data, seasonal trends, and rising fear hit equities

Economic signals aren’t helping. Last week’s numbers showed an uptick in inflation, weaker job growth, and slower consumer spending. That added to the anxiety, especially heading into August and September, historically the worst-performing months for stocks. Over the past thirty years, those two months have averaged -0.7% returns, while the rest of the year tends to bring 1.1% gains.

At the same time, stocks have gotten pricey. The S&P 500’s 14-day relative strength index surged to 76 last week, the highest since July 2024, just before the U.S. market peaked last summer. That number is way past the level of 70, which traders often use to flag overheated markets.

Options traders are clearly uneasy. Contracts that hedge against a 10% drop in the SPDR S&P 500 ETF Trust (SPY) over the next 60 days are now much more expensive than contracts betting on gains. That spread hasn’t been this wide since the regional banking crisis in May 2023.

Even with all the red flags, the broader market managed to bounce on Monday. The S&P 500 and Nasdaq 100 each rose by more than 1%, as traders gambled that the Federal Reserve might soon lower interest rates. Still, the mood remains cautious.

Firms like Evercore and Deutsche Bank are urging clients to stay invested, but only in select areas. Julian Emanuel is still backing companies riding the AI boom, while Thatte pointed out that the market tends to see small 3% dips every two months, and bigger 5% drops every three to four months. Wilson, sticking to his stance, told clients, “We’re buyers of dips.”

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