The Wall Street Journal’s Saturday/Sunday, August 2-3, 2025 article, “Software IPO Left $3 Billion on Table” brought back the old debate about money being “left on the table” by issuers and investment bankers who underprice shares sold in an issuer’s IPO. The Wall Street Journal wrote, “Figma and selling shareholders raised $1.2 billion in the IPO. They could have pocketed much more had the initial shares, priced at $33 apiece, been priced higher.” It noted that Figma‘s shares jumped 250% in its first day of trading on July 31 to $115.50 per share, suggesting that its sale of about 37 million shares in the IPO could have been $3.0 billion more. At the close on August 1, 2025, the stock continued to rally to $122 per share, before declining by a third to settle at $88.60 on August 4, 2025.
The Wall Street Journal noted further that, “One of the last times there was so much money left on the table was in cloud-storage company Snowflake’s 2020 IPO when its share price more than doubled, meaning money raised in the IPO could have been $3.75 billion more.”
The first day pop is a valuation phenomenon with many factors. The concept is that trading up on the first day of trading is a sign of a good company, but if the first trading days’ closing price far exceeds the IPO price, the difference, when multiplied by the number of shares sold in the IPO, would be money “left on the table” by the company for underpricing its shares.
The “money left on the table” stock pop has been debated since the dot.com era of the late 1990s and criticized by some as evidence of a broken system, which has since influenced an evolution of the traditional underwritten IPO structure, fixed pricing and allocation process with direct listings and SPACs.
Comparing the IPO price to the first day’s closing might be faulty logic because, by the end of the IPO’s first day of trading, last trades represent a price set by secondary sales in aftermarket trading, frequently to retail investors flipping the stock, of a fraction of the number of shares sold in the IPO at one time to hundreds or more large investors using a Dutch auction-like model that is designed to get the highest price for the highest number of shares.
In IPOs, investors demand a discount to the issuer’s valuation, as reflected in the IPO price, for buying a large volume of shares because the higher amount is harder to sell. As noted by The Wall Street Journal, “Figma executives wanted certain large institutional investors – often coveted as long-term stockholders – to purchase stock in the offering, and some of those funds refused to pay much above the targeted price range…. That forced a cap on the IPO price.“ In other words, if the company were to have moved the IPO price higher, they risked leaving these large institutional investors behind.
Given the sluggishness in the IPO market over the last 18 months, it is understandable that an issuer would not be rigid about the price, or committed to “taking every dollar off the table.” Pricing a deal too aggressively could backfire if investors get burned.
Issuers, investment bankers and investors are hoping the Figma offering opens up the IPO calendar this fall, with or without the stock pops on the first day. Sometimes leaving that money on the table is what is needed to get the job done.
PartnerArmed with more than three decades of capital market experience, Spencer represents smaller publicly traded companies, and often underwriters and investment funds, in public and private securities offerings. He focuses ...