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?
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.
But how is the IPO a sign of success in that case?
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.
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They are following, they just understand it better than you do.
I am trying to explore the ways in which the IPO, in particular, separate from the continued operation of the company, is evidence that blocking M&A is good. I have seen nothing from you supporting Khan's position that the IPO is vindication for blocking M&A.
Her particular claim was that it was "a great reminder that letting startups grow into independently successful businesses, rather than be bought up by existing giants, can generate enormous value.” However, the IPO price was $700M less than the value the company was at three years ago, which, given opportunity costs and inflation, would not seem to be an indicator of enormous value being generated.
The current market cap of Figma is around 60B if I read it correctly. Yes, not all of it was IPOd, but from purely this perspective it was hugely successful. But then it’s also unfair to compare this market cap as is, because I would expect Figma as separate entity will grow better than Adobe as a whole. Meaning that people who’ll hold Figma stocks right now have a chance to have better returns in a future.
The amount of money in the pockets of the owners (no matter who they are) is not what antitrust is about.
That’s unrelated to the IPO.
How? A VC-backed company must have an exit path for its investors at some point, and this exit is either:
- sell the company to a bigger player, reinforcing their dominant position (often close to monopolistic in tech).
- go to IPO, keeping the company independence and fighting power concentration.
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.)
That's true, but PE is negligible in tech. And if all you can rely on for exit is private equity then you'll end up with a tech scene as dynamic as the European one…
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.
> Free market
Free market requires maintenance. Laissez-faire is a lie and always has been.
If you let all the companies consolidate into mega monopolies who have a stranglehold on the market, where is the free market?
Without regulations (which are laws) Dominant companies would just send gangsters to break up rival businesses. They still do that today, but through different strategies e.g. price dumping, where they operate at a loss in order to squash competition, then proceed to hike up prices and extort as much value as possible.
For someone who believes in free market, how is it acceptable to have consolidated monopolies? The market is free when there is competition. If there is no competition there is no freedom. Of course I know that for many "free market defenders" "competition is for losers" (was it Peter Thiel?), and ultimately nobody cares of the abstract value of freedom.
Monopolies are natural in highly technical industries. But monopolies don't last forever. New technologies wipe out monopolies all the time. ChatGPT is disrupting Google search monopoly. Solar/EV is disrupting oil. Tools like V0 is disrupting Figma. ChatGPT itself is disrupting iOS and Android. The list goes on and on and on.
You are mixing industry and company. LLMs are overtaking Google search (I.e., internet search which is a monopoly), but it doesn't have to be chatGPT (I.e. openAI).
In any case, it's irrelevant they are not eternal (especially if we go from monopoly to monopoly), the point stands: if you have a monopoly you don't have freedom and free market doesn't work at all.
“Solar/EV is disrupting oil” — where exactly has solar/EVs disrupted oil without the benefit of (wise, IMO) government intervention and subsidies?
My point is that is is the right thing to do and multiple countries' regulators agree. Monopolies have proven themselves to be bad and consolidation is how they are created. The "free market" (as if there is such a thing) does not take care of this, because it's not profitable to compete with such a powerful incumbent. Any attempt to compete would require insane capex and have a higher price tag for consumers, who would likely have to pay it not instead of but alongside the current incumbent's price, which very few would accept. If instead, you intervene and block the merger, the company can (and is incentivised to) grow and branch out, competing with the one that tried to acquire it.
Obviously this is a YC forum and many people have a startup bias, but I'm nowhere near that scene. Many startups do even worse things than some of the big guys, because they aspire to become them. The "burn investor money to get market share at a loss, kill all competition, become a monopoly, then enshittify and make infinite money" strategy wouldn't be nearly as effective if we had proper antitrust enforcement.
I, too, think we should just let rich people do whatever they want!
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.
Who is “they”, who lost money?
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”.
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.
Yep, and because HP did that, we now have no mobile smartphones. If only the government would have prevented that!!
Caplan said it best. The market is great at doing good things that sound bad. The government is great at doing bad things that sound good.
Imagine a world in which Internet Explorer is the only browser around. That's what would happen without government intervention.
Regulations are literally the only thing slowing down the corporate dystopian future.
The idea that government regulation created chrome is so bizarre I simply have to discard your comment out of hand
Its market cap is about $58b right now. Tripled in three years!
But the company only sold the shares at $19.3B.
But they also only sold a very small number of shares at that valuation, vs all of them at $20B to Adobe.
this is the answer
Right, which gave them 19B (ish) to play with and they are an independent competitor to Adobe.
Mergers trigger layoffs
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.
The employees will have to wait 180 days (at least that's the standard) before selling any shares, so they usually feel the effects of a "bounce".
If they have to issue shares the higher valuation is significant
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!
Yeah, because now it's not owned by Adobe, who are tanking their own stock price.
Figma actually IPO'd at $27B (not $19.3B) and is now trading at over $40B market cap, representing a significant premium over Adobe's $20B offer.
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.
Yes, otherwise we get no “free market” and everyone looses a good graphics tool as an option.
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.
Yes, more competition is a success.
Clearly yes