To The Moon

$Figma(FIG)$

Figma’s High-Flying Valuation Meets Harsh Reality

Once the darling of design startups and Silicon Valley venture capitalists, Figma has suffered a sharp reversal of fortunes. Following its long-anticipated options trading debut, the stock cratered by 18%, triggering a wave of bearish sentiment among retail and institutional traders alike. While options markets often inject volatility into newly listed names, the scale and swiftness of the decline have alarmed many long-time bulls.

Just a few years ago, Figma was heralded as a potential Adobe killer, with sleek collaboration tools, a loyal design community, and viral adoption among tech companies. Its once $20 billion valuation (and a now-dead $20 billion Adobe acquisition attempt) set the tone for sky-high expectations. But as investor scrutiny deepens, particularly in a post-ZIRP world where cash flow, profitability, and defensible moats matter again, the Figma story is being re-evaluated—and not favorably.

Is this just volatility ahead of a long-term growth trajectory, or a broader signal that Figma’s best days are behind it?

Options Market Debut: Catalyst or Curse?

The launch of options trading on Figma marked a significant milestone in the stock’s evolution. But what was intended to broaden investor participation and hedge fund interest quickly turned into a downside accelerant. High implied volatility and heavy short-dated bearish bets signaled traders were prepared for pain. The initial wave of put buying and short-delta strategies overwhelmed bullish sentiment, sparking a 18% single-day drop—one of the largest among recent tech IPOs or direct listings.

Options can cut both ways: while they provide risk management and speculative avenues, they also amplify price swings. In Figma's case, the launch effectively created a “liquidity event” where market makers, anticipating hedging flows, may have helped accelerate the selloff.

Moreover, the options activity revealed something deeper—investor skepticism about Figma’s near-term growth and valuation, especially in a macro environment that no longer rewards unprofitable or slowing SaaS names.

From Market Darling to Momentum Downtrend

Figma’s journey from a high-flying private unicorn to a publicly scrutinized growth stock has been rocky. Despite robust product loyalty and strong usage metrics, valuation compression has been relentless.

The initial private market excitement peaked in 2021 when Adobe offered $20 billion to acquire Figma. That deal ultimately collapsed due to antitrust scrutiny, but it implicitly validated Figma's lofty valuation—at least in theory. Today, public market investors aren't willing to pay that kind of premium.

Since its public debut, Figma has declined more than 40% from its highs, even before the recent 18% plunge. Momentum has firmly shifted to the downside, as short sellers circle and growth investors flee toward safer bets like Microsoft, Adobe, or even newer AI-enabled productivity startups.

The post-IPO lockup expiration looms large as another potential catalyst for further downside, with early insiders and employees potentially offloading shares into a weak tape.

Performance Overview and Market Feedback

Stock Performance:

• Figma is currently trading around $38 per share, down sharply from highs near $62.

• The stock has underperformed major SaaS peers and broader indices (Nasdaq +12% YTD vs. Figma -18%).

• The 50-day moving average has crossed below the 200-day (death cross), indicating a technical downtrend.

• Relative Strength Index (RSI) recently dipped below 30, confirming oversold territory—but bearish momentum remains intact.

Wall Street Sentiment:

• Sell-side analysts remain mixed. Some believe the stock is oversold and ripe for a bounce, while others argue Figma’s valuation is still too rich given slowing enterprise expansion and competitive headwinds.

• Short interest has surged to nearly 12% of float, a high for a recently listed tech company.

• Options volume post-launch was skewed 3:1 in favor of puts, particularly on 30-day expirations near the $35 and $30 strike.

In short, the market has spoken—and it’s pricing in more downside risk than upside optimism in the near term.

Competitive Pressures Are Mounting

Figma’s original success stemmed from displacing Adobe XD and dominating browser-based, collaborative design. But Adobe has fought back aggressively. Since the failed merger, Adobe has not only improved its own suite but also bundled tools at aggressive pricing. Figma’s freemium-to-paid conversion strategy, once a strength, is now being undercut by Adobe’s aggressive enterprise-level bundling.

Meanwhile, new challengers have emerged, particularly from the AI design space. Startups integrating generative AI into web design, app mockups, and UX workflows are catching venture and user attention. Though still early, these competitors are creating uncertainty about Figma’s long-term defensibility.

Figma has responded with its own AI tools and features, but execution has been uneven. The firm still commands loyalty among designers and small teams, but enterprise adoption is not accelerating as expected, especially amid widespread SaaS budget cuts.

Financials and Valuation: Still Too Pricey?

Figma is growing—just not fast enough to justify its valuation.

Financial Snapshot (Estimated FY2025):

• Revenue: ~$700 million (up ~25% YoY)

• Gross margin: ~80%

• Operating margin: negative low-single digits

• FCF margin: near break-even

At a $38 stock price, Figma trades at roughly 13.5x forward sales—a premium to established players like Adobe (~9x), and even higher than faster-growing upstarts like Monday.com or Asana (~6–8x).

The problem isn't just the premium—it's the slowdown in enterprise expansion and lack of clear operating leverage. Investors are now demanding profitability or high cash flow margins. Figma offers neither.

Unless the company demonstrates a path to 30%+ free cash flow margins within two years or accelerates revenue growth back above 35% YoY, its current multiple will likely compress further.

Investment Highlights

1. Strong Product-Led Growth Origins Figma continues to command high user satisfaction, especially among product designers, UI/UX teams, and small developer studios. Its viral bottom-up adoption model remains effective—but it's unclear if this scales well into the enterprise.

2. AI Integration in Early Stages The company is experimenting with generative design suggestions, auto-layout features, and predictive prototyping, but these features are still lagging best-in-class AI design startups. Execution here is critical for long-term viability.

3. Options Market Now in Play The addition of options may increase volatility, but it also allows for more nuanced strategies among institutions. Hedging, short interest coverage, or tactical long setups (e.g., bull put spreads) may emerge—especially if the stock nears oversold levels.

4. Balance Sheet Strength Figma maintains a solid cash position (~$1.2B), offering flexibility in an environment where capital efficiency is prized. The firm has no significant debt, reducing default risk in a downturn.

5. Lockup Expiration Risk A looming lockup expiry means that pre-IPO shareholders may flood the market with supply, potentially pushing prices even lower. The market is already anticipating this risk, and it may serve as a short-term trade setup depending on timing.

Verdict: August 2025 Entry Price — Hold with Bearish Bias

At $38 per share in August 2025, Figma is not yet a compelling long-term buy, despite the steep recent correction. The stock remains overvalued relative to peers and growth potential, and the launch of options trading introduces new downside catalysts.

However, shorting here also carries significant risk. With implied volatility elevated, borrowing costs rising, and the potential for sharp bounces (especially post-lockup), shorting at this level may be late unless part of a hedged strategy. A small speculative long (via call spreads) could make sense if you believe oversold conditions will reverse short term—but the fundamental case remains too weak for a strong long position.

Verdict: Hold Tactical View: Avoid initiating new shorts unless stock rebounds to $45–$48 Buy Zone: Below $30, if accompanied by enterprise reacceleration or margin improvement Short Trigger: If next quarter shows declining net dollar retention or weak AI feature adoption

Conclusion: Short-Term Noise or Structural Decline?

Figma’s -18% plunge after its options launch is not merely a technical hiccup—it reflects broader doubts about growth, defensibility, and valuation. While the company still boasts a strong product and loyal user base, investors are no longer willing to pay SaaS premiums for companies with no clear profitability path.

The options debut acted as a truth serum—exposing fragilities in sentiment, business model concerns, and the stock’s inability to withstand scrutiny in a high-rate, low-patience macro environment. The coming months, including Figma’s next earnings release and potential insider selling, will determine whether this correction stabilizes or accelerates into a full-blown bear cycle.

Investors should remain cautious. This is no longer a momentum darling—it’s a battleground stock. And while battlegrounds create opportunity, they also punish the unprepared.

Key Takeaways:

1. Figma dropped 18% after options launch, signaling bearish sentiment.

2. Competitive pressure from Adobe and AI-native startups is intensifying.

3. Valuation remains stretched at 13.5x forward sales despite slowing growth.

4. Options activity and upcoming lockup expiration introduce further volatility.

5. Verdict: Hold — watch for sub-$30 entries or confirmation of enterprise momentum.