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Lululemon Athletica (NASDAQ: LULU) — Undervalued Champion Poised to Outperform

Author’s Note: We are long Lululemon stock and stand to benefit if its share price increases. All information presented here is derived from public records and sources, which are cited. We invite readers to review these sources and form their own conclusions.

Executive Summary

Lululemon Athletica is a severely undervalued growth champion in athletic apparel, trading at beaten-down valuations despite industry-leading fundamentals. Prevailing market skepticism – over slowing U.S. trends, one past misstep (the Mirror acquisition), and competition – has created a mispriced opportunity for investors. In reality, LULU’s global growth engine (especially in China), expanding product lines (menswear, footwear), and fanatically loyal customer base underpin a trajectory that Wall Street fails to fully appreciate. With operating margins back near record highs and returns on capital above 25%, LULU generates robust cash flows enabling aggressive buybacks and strategic investments. We believe the stock’s ~60% drop from its peak is unwarranted, and that Lululemon’s Board and Executives should recognize the disconnect and act to unlock value. In this bullish activist report, we detail how misperceptions have pummeled LULU’s share price, why those bears are wrong, and how Lululemon’s underappreciated strengths position the company to prove skeptics wrong. We conclude with pointed questions for management to drive accountability and close the gap between LULU’s operational performance and its lagging stock price.

1. Market Misperceptions vs. Reality

The bear case is built on outdated narratives and shortsighted fears. Skeptics point to slowing North America growth, rising competition, and the ghost of Lululemon’s Mirror flop as signs the company’s best days are over. In reality, these concerns are either temporary or overblown, and the company’s recent results obliterate many of the doomsday prophecies. Misperception: “Lululemon’s growth is stalling, especially in a saturated U.S. athleisure market.” Reality: LULU grew revenues 18% in 2023 and 10% in 2024 (despite macro headwinds), outpacing virtually all peers. International sales are booming (+34% last year) even as U.S. comps pause. Misperception: “Margin pressures (high inventory, discounts) will erode profitability.” Reality: LULU’s gross margin expanded to 59% – far above Nike’s mid-40s gross margins – and operating margin increased to 23.7% in 2024. Inventories have and LULU has largely avoided heavy discounting thanks to its pricing power. Misperception: “Competition from giants (Nike, Adidas, Under Armour) and niche brands (Athleta, Vuori, Beyond Yoga, Alo) will steal share.” Reality: LULU continues to take market share in the athletic apparel space through its focused brand identity and community connection. As Nike struggled with declining profits and Adidas dealt with its own crises, Lululemon’s revenue grew much faster (20%+ CAGR over a decade vs. Nike’s ~6%). No competitor replicates LULU’s yoga/community-centric moat. Misperception: “The Mirror fiasco shows management’s poor judgment and threatens LULU’s tech ambitions.” Reality: Yes, the 2020 Mirror acquisition was a rare mistake – but management has swiftly course-corrected (as we detail later), minimizing further losses and refocusing on core strengths. In short, the market’s worries are either transient issues that LULU is overcoming or misinterpretations of LULU’s prudent investments for the future. We find the negative narratives deeply disconnected from the company’s actual performance.

In the same vein, sentiment around LULU has been negatively skewed by cautious analysts and high-profile skeptics. When Q4 2024 guidance came in conservative, the stock fell ~10% amid hyperbolic commentary that Lululemon’s era of growth was ending. This knee-jerk pessimism ignored that LULU was prudently guiding in a soft economy – a far cry from a broken growth story. We believe these short-term sentiment swings have obscured the long-term picture: Lululemon is continuing to execute exceptionally well. For instance, while some fretted that U.S. comps went flat in late 2024, they overlooked that LULU deliberately pulled back on excessive inventory and discounting, protecting margins and brand integrity. International comps still rose a dazzling 22%, proving that demand remains robust where LULU is expanding. The fears of “brand fatigue” in North America also ignore the reality that LULU still posted positive 8% revenue growth in the Americas last year despite lapping explosive pandemic-fueled gains – hardly a collapse, and likely a baseline for reacceleration as the macro environment improves.

Bottom line: The market has been fighting the last war, focusing on past challenges (Mirror, supply chain hiccups, etc.) and missing the current reality of LULU’s accelerating global business and strategic agility. This misalignment between perception and reality sets the stage for significant upside, as we expect the narrative to catch up to the facts in coming quarters. Our report next quantifies just how stark Lululemon’s undervaluation has become in light of these misperceptions.

2. Valuation Disconnect: LULU vs. Peers and History

Lululemon’s stock is priced for failure, but the company is delivering success. The valuation metrics tell a shocking story: LULU now trades near multi-year lows on earnings and cash flow multiples, despite growing faster and earning higher margins than almost any competitor. This disconnect is an open invitation for savvy investors. At around $168 per share (mid-November 2025), LULU’s market cap is only ~$20 billion – a fraction of Nike’s ~$100+ billion – even though LULU’s revenue (~$10.6B) is over one-fourth of Nike’s and rising much faster. LULU’s forward P/E is ~13×, a steep discount to the apparel industry average of ~16× and far below LULU’s historical average of ~31×. In fact, one analysis noted Lululemon is trading at just one-third of its 5-year average EV/EBITDA multiple – a deep value multiple for what remains a growth company. LULU’s enterprise value is roughly 6.8× its TTM EBITDA, according to Bloomberg, whereas Nike changes hands at ~14× and the broader sector ~10×. This is a dramatic re-rating: LULU’s EV/EBITDA was routinely 20–30× during its high-growth phase, and even with more moderate growth now, an 6.8× multiple appears irrationally low for a premium brand with expanding international momentum.

Critically, Lululemon’s depressed valuation stands in contrast to many peers and “hot” athletic names. For example, upstart On Holding (ONON) trades at nearly 3× LULU’s forward earnings thanks to market hype around its running shoes – yet Lululemon, with far larger profits and proven brand equity, trades at a fraction. Even Nike, after its stock decline, still commands a forward P/E of ~30× and forward EV/EBITDA of ~21×, both more than double LULU’s level. The market seems to be treating LULU as if it were an ex-growth or structurally impaired retailer – which could not be further from the truth. We note that LULU’s 5-year revenue CAGR (2018–2023) was ~21%, while Nike’s sales are effectively flat. LULU also has best-in-class margins. Yet today investors can buy LULU at roughly half of Nike’s valuation metrics. The divergence is striking.

So what’s driving this disconnect? In our view, a combination of herd psychology and short-term noise. LULU’s share price hit an all-time high of around $470 in late 2023, then tumbled ~60% to ~$168 as of mid-November 2025 as growth cooled from torrid pandemic levels and the Mirror overhang spooked some investors. Once the stock had that downward momentum, negative narratives fed on themselves, and LULU became a “show-me story” again. But the underlying business never fell apart – it kept compounding sales and earnings, making today’s bargain valuation possible. Simply put, Lululemon’s earnings have grown into the stock (and then some). The result: LULU now sports trailing and forward P/E ratios in the low teens, which is an all-time low.

To illustrate the upside potential, consider a simple scenario. If LULU can earn around $14–15 EPS in FY2025 (slightly above current consensus) given ongoing growth. Applying even a modest 20× P/E (still below LULU’s historical average and under Nike’s current multiple), we’d get a stock price of $280–300, roughly 70–80% above the recent ~$168. If LULU were to be valued at parity with the broader apparel industry on EV/EBITDA (say ~10×), it would imply a share price around $230 – again significantly above current. And those scenarios assume no re-acceleration in growth; any positive surprise (e.g. a few quarters of reaccelerating comps or better margins) could justify a premium multiple and push the stock even higher.

This valuation disconnect has not gone unnoticed by all. Some independent analyses (e.g. SimplyWallSt and others) calculate LULU is 30–40% undervalued based on intrinsic value models. Yet, curiously, Wall Street’s consensus price targets remain muted (consensus price target is currently $190/sh), suggesting analysts are hesitant to buck the negative narrative. This sets up a classic contrarian opportunity. We believe that as LULU continues to post solid results – and especially if any one of its growth initiatives exceeds the tepid expectations – the market will be forced to rerate the stock upward. In essence, LULU offers growth stock upside at value stock pricing, an extremely attractive combination.

In summary, the numbers don’t lie: LULU’s stock is priced for calamity while the business is performing admirably. The recent share price slump appears to have been an emotional overshoot. With the valuation groundwork laid, we now turn to the core strengths of Lululemon that underpin our bullish view – starting with its unique brand power and cult-like customer loyalty that competitors can only envy.

3. Brand Strength, Community, and Customer Loyalty – LULU’s Intangible Moat

Lululemon isn’t just selling yoga pants; it’s selling a lifestyle and community. The company has meticulously built an aspirational brand with fiercely loyal customers, which translates into pricing power, repeat business, and low markdown reliance. Key indicators – from net promoter scores to sales per square foot – confirm that LULU’s brand equity is second to none in retail. This “cult brand” status forms an economic moat that competitors struggle to match, and it’s a major reason why we believe LULU can sustain premium growth and margins.

LULU’s App-Only Black Friday Presale:

LULU’s app #5 in Apple App Store

Consider Lululemon’s customer loyalty metrics. In independent surveys, LULU scores an extremely high Net Promoter Score (NPS) – one report put it at 83, which is world-class by any standard. (For context, an NPS above 50 is considered excellent.) This means Lululemon’s customers enthusiastically recommend the brand to others, reflecting deep satisfaction and loyalty. Similarly, Lululemon’s membership program has exploded in size: the free “Essential” membership program now counts 28 million members, up 65% year-over-year. These are astonishing figures – 28 million people (nearly the population of Texas) have signed up to be in LULU’s ecosystem, gaining access to early product drops, community events, and more. The company smartly expanded this program after initially piloting a paid loyalty membership; the result is a massive database of engaged fans that LULU can draw on for repeat sales and product feedback. In the first five months after relaunching membership, LULU gained 9 million new sign-ups (with over 30% utilizing benefits), showing how eager customers are to deepen their relationship with the brand. LULU’s recent 2025 early Black Friday sale was exclusively available to member’s in its Android and IOS app. After launching the presale, LULU’s IOS app surged into the top 10 iPhone App Store apps – with the likes of ChatGPT, Google, etc.

Perhaps the most telling statistic of brand strength is sales productivity. Lululemon’s stores are money-printing machines in terms of revenue per square foot. In fiscal 2023, LULU hit $1,609 sales per sq. ft., up from $1,580 in 2022. This is an elite figure in retail – by comparison, Apple’s famously high-traffic stores do about $5,000 per sq.ft., but among apparel retailers LULU is near the top. It far outpaces mall staples or competitors; for instance, LULU’s $1,600+ is several times Athleta’s (Gap Inc doesn’t break it out, but Gap’s overall is around ~$400) and comfortably above Nike’s own direct retail stores. Such productivity signifies that each Lululemon store is a destination with steady foot traffic and full-price sell-through, driven by product desirability and community engagement. Moreover, LULU’s e-commerce (~40% of revenue) adds another powerful channel – one that grew 300% since the Pandemic – showing that the brand resonates both in-store and online.

Lululemon’s marketing strategy has always been atypical – and effective. Instead of splashy ads, it invests in community-building and word-of-mouth. The company hosts free yoga classes and run clubs at stores, nurtures a network of over 1,700 local ambassadors (trainers, athletes, even mindfulness coaches), and sponsors events like the Lululemon SeaWheeze half marathon. This grassroots approach yields authentic connections. We see it in China, for example, where LULU organized “Sweatlife” festivals and the Summer Sweat Games drawing 10,000+ participants across 40 cities – embedding the brand in the local fitness culture. These efforts translate to a tribe-like customer base that is far less price-sensitive. During 2022’s inflation surge, many apparel retailers resorted to heavy discounting; Lululemon largely held the line, and customers kept buying, a testament to perceived value. As the NFL’s Chief Revenue Officer observed in partnering with LULU, the brand has “a loyal fan base built on culture and meaningful connections” – an asset that thoroughly impressed even a major sports league.

Another advantage of LULU’s brand: multi-generational and multi-gender appeal. Historically known for women’s yoga wear, Lululemon today is embraced by men, women, teens, and even professional athletes. It’s not uncommon to see an entire family sporting the logo. The product quality and feel create evangelists – customers who start with one pair of Align tights or ABC pants and before long have a closetful of LULU gear. Notably, Lululemon ranks #1 in brand loyalty for women’s athletic apparel in multiple surveys, and it’s quickly climbing the ranks for men as well. CEO Calvin McDonald has highlighted that new customers typically ramp up spend significantly in their second and third years, showing strong retention. And founder Chip Wilson, always has emphasized that cultivating a certain aspirational ethos (centered on wellness, mindfulness, “sweat life”) would give LULU a unique cachet. That vision clearly endures, as Lululemon remains synonymous with quality and self-improvement in the minds of consumers.

In summary, Lululemon’s brand strength is an economic moat protecting it from competition and downturns. It enables premium pricing (full-price sell-through is high), mitigates advertising spend (the community spreads the word organically), and supports expansion into new categories (loyal customers try new LULU offerings eagerly). When we see 21% of customers labeled “detractors” in one generic NPS source, we take it with a grain of salt – more robust indicators like the 83 NPS and the growth of membership tell the true story of a beloved brand. Any analysis that doubts LULU’s brand power – as some bears do – is simply not paying attention to the real-world evidence of loyalty. This durable brand equity underpins the company’s financial success, which we explore next in terms of margins and cash flow.

4. Margin Recapture and Robust Cash Flows (Mirror Is in the Rearview)

Lululemon’s profitability is back on the upswing, as one-off drags fade and the core business flexes its leverage. After the costly Mirror experiment knocked margins down in 2022, LULU has swiftly recaptured lost margin and is now running at near-record profitability. Gross margins have rebounded to nearly 60%, and operating margin hit 23.7% in FY2024 – up from 2023 and ahead of pre-Mirror levels. This margin resilience is critical: it shows that LULU’s growth isn’t coming at the expense of profitability. On the contrary, Lululemon’s business model (direct-to-consumer, premium pricing, controlled distribution) yields a highly profitable enterprise with abundant cash generation. In turn, these cash flows are being used to reward shareholders via aggressive buybacks and to reinvest in growth avenues – a virtuous cycle.

First, let’s address Mirror, the connected-fitness device Lululemon acquired in 2020. By 2022, it was clear the purchase was ill-timed (at the pandemic’s peak) and that Mirror’s hardware sales were disappointing. The financial impact was significant: LULU took a $443 million impairment charge related to Mirror in Q4 2022, which dragged that year’s GAAP operating margin down to just 16.4%. It was one of the few blemishes on LULU’s track record. However, management did not allow this to become a chronic drain. In 2023, Lululemon pivoted – deciding to discontinue selling the Mirror hardware by end of 2023 and cease in-house content production. They struck a smart partnership with Peloton (more on that later) to provide content to existing Mirror users, effectively cutting off the bleeding. By excluding Mirror-related charges, we see LULU’s true earnings power: adjusted EPS in 2023 was $12.77, nearly double the $6.68 GAAP EPS of 2022 which had Mirror write-downs. In other words, once the Mirror mistakes are stripped out, LULU’s earnings growth trajectory remains intact. The company’s adjusted operating margin bounced back to 22.1% in 2022 and 23.2% in 2023 (versus ~16% GAAP in 2022), underscoring that Mirror was an aberration. Now with Mirror fully wound down (the last inventory charges were taken in 2023), Lululemon’s reported margins are normalizing upward – GAAP op margin was 23.7% in 2024, and a hefty 28.9% in the seasonally strong Q4. The “margin recapture” is essentially complete, and going forward LULU can focus on incremental improvements rather than digging out of a hole.

Crucially, Lululemon’s profitability quality is very high. Gross margin expanded 90 bps to 59.2% in 2024, approaching its all-time highs. This reflects easing supply chain costs (lower air freight and markdowns in 2023 vs 2022) and the inherent advantage of LULU’s vertical model. Whereas many apparel companies suffer margin dilution from wholesale distribution, Lululemon sells predominantly through its own stores and website (with DTC making up 42% of sales). It captures the full retail markup. Additionally, LULU’s product mix skews to higher-margin apparel and accessories, and its brand strength allows minimal discounting. The result: LULU’s gross margin is ~14 points higher than Nike’s (which was ~45% last year), and higher even than luxury names like Gucci parent Kering (~55%). Very few apparel companies hit 60% gross margin; LULU is in that elite club. This gives plenty of cushion to invest in SG&A for growth initiatives while still delivering strong operating profits. On the cost side, Lululemon has shown discipline. Despite opening 50+ stores annually and expanding digital capabilities, it leverages scale in corporate overhead. In 2024, operating expenses grew slower than sales, yielding that op margin uptick. Store productivity gains (sales per sq.ft. rising) mean fixed costs (rent, store labor) are spread over more revenue.

The upshot of robust margins is powerful cash flow. Lululemon generated over $2+ billion in operating cash flow in the last twelve months, funding growth and returning cash to shareholders. Even after pandemic disruptions and the Mirror saga, LULU’s balance sheet is pristine – a far cry from many retailers that carry heavy debt. This gives LULU strategic flexibility and resilience. Importantly, management is not letting that cash sit idle: they are buying back stock at these depressed prices. In 2024 (FY ending Jan 2025), LULU repurchased 5.1 million shares for $1.6 billion – that’s roughly 4% of shares outstanding retired in one year. And they’re not done. The Board has further authorization to continue an aggressive buyback program, signaling confidence in the company’s future. In Q3 2023 alone, LULU bought ~0.6M shares at an average $380/share (ironically much higher than today’s price), and in Q4 2024 they bought another 0.9M at ~$369. Now, with the stock down to ~$168/share, ongoing buybacks stand to be even more accretive. We applaud this capital allocation: management is effectively saying they believe the stock is a bargain – a view we heartily share.

Put simply, Lululemon’s financial engine is humming. It boasts higher margins and returns on capital than almost any specialty retailer. LULU converts a big chunk of earnings to free cash flow, and it’s using that to both reinvest (new stores in growth markets, innovation in product) and repurchase shares aggressively. The Mirror detour is firmly in the rearview mirror – and ironically, having learned from that, management seems even more focused on core execution and shareholder returns. We would not be surprised if LULU initiates a dividend in coming years, given cash generation, but for now buybacks make the most sense at this valuation.

To conclude this section: Lululemon has proven its ability to adjust and maintain elite profitability. The narrative of “margin pressure” is outdated – margins are rising, not falling. The company’s cost structure and pricing power provide a buffer in any downturn, and its cash war chest provides optionality (whether to invest or return capital). This is not a fad or low-quality growth story; this is a highly profitable growth story. Next, we dive into one of the biggest growth drivers that the market underestimates: Lululemon’s international expansion, especially the rocket-ship trajectory in China.

5. International Expansion: The Underappreciated Growth Engine (China in Focus)

Lululemon’s international business is on fire – and it’s just getting started. While skeptics fixate on a maturing U.S. market, LULU’s overseas segment (from Asia to Europe) is scaling at extraordinary rates, dramatically shifting the company’s mix. In the most recent quarter, international sales jumped +49% year-on-year, and for full-year 2024 they surged 34% (36% in constant currency) – vastly outpacing the 4% growth in North America. International now represents roughly 26% of LULU’s revenue (FY2024), up from just ~15% in 2021. Management’s Power of Three ×2 plan explicitly targets a quadrupling of international revenue from 2021 to 2026, and current trends show LULU is well on track, if not ahead, of that ambitious goal. The market, in our view, does not fully appreciate how powerful this international momentum is – especially in China, where Lululemon is emerging as a status symbol and athletic staple for affluent consumers.

Breakdown by region underscores the seismic shift underway. In 2021, the Americas (mostly U.S. and Canada) provided 85% of sales while Mainland China was only ~7%. Fast forward to 2023: Americas share dropped to 79%, Mainland China doubled to 10%, and other international markets (Europe, APAC ex-China) made up 11%. That means over 21% of revenue came from outside North America by 2023 – a remarkably fast change. The trend continued in 2024: LULU disclosed that revenue rose 41% in China Mainland and 27% in Rest of World during the year, vs just +4% in Americas. Indeed, in Q4 2024, international comps were +20% while Americas comps were flat. Lululemon has hit critical mass in some key global markets, and is leveraging brand heat that in many cases exceeds what the company saw in its early U.S. days. For example, in China, Lululemon surpassed $1 billion in annual net revenue by 2024 – an impressive milestone achieved barely a decade since entering the country. And there’s so much runway ahead: Nike does over $8B in Greater China, showing the TAM for athletic apparel there. LULU capturing just a fraction of that indicates multi-billion dollar potential in China alone.

What’s driving this international success? Several factors:
- Brand resonance globally: The themes Lululemon stands for – health, mindfulness, premium quality – have universal appeal. The brand has smartly localized its approach (e.g. using Chinese ambassadors, celebrating local festivals) while maintaining its global cachet. Chinese consumers have embraced LULU as a aspirational Western brand, akin to how they took to Apple or Starbucks in earlier waves. In Europe, LULU is still relatively nascent but is seen as a high-end technical label, often with little direct competition in the yoga segment. Importantly, no entrenched local competitor dominates the “athleisure” niche abroad like LULU does. This white space allows LULU to expand rapidly where it plants the flag.
- Aggressive store expansion and omni presence: Lululemon is opening stores at a rapid clip internationally, particularly in Asia. In 2023 alone, they opened 28 net new stores in Mainland China (rising from 99 to 127 stores). Total APAC stores (excluding China) also grew from 91 to 98, and EMEA stores from 46 to 48 (plus many new franchise locations in the Middle East). Each new store not only adds sales, but acts as brand advertising and a community hub in markets where awareness is still building. Additionally, LULU’s digital capabilities mean that even in countries with few stores, customers can buy online. The company noted it launched local e-commerce sites and partnerships (like on Tmall in China, Zalando in Europe) to reach beyond physical footprint. This omni-channel approach accelerates international penetration.
- Localization and cultural adaptation: Unlike some American brands that failed abroad by assuming a “one-size-fits-all” approach, Lululemon has been thoughtful. Example: in Asia, it offers more modest styles and bright colorways for local tastes, and sizes that accommodate different body types. They also integrate community events that resonate locally – e.g., in Seoul they partner with K-pop fitness influencers, in London they sponsor yoga classes in parks. This drives word-of-mouth in each region.

The numbers speak volumes. For full-year 2024, international (which includes Asia-Pacific and EMEA) reached about $2.8 billion in sales, more than double what it was just two years prior. Mainland China alone was over $800M and is on pace for $1B+. Critically, these markets are far from saturated. LULU’s brand awareness in China and Europe is growing but still has headroom. For perspective, LULU has ~150 stores in China (including Hong Kong/Taiwan) for a population of 1.4 billion, versus ~440 stores in the U.S./Canada for ~360 million people. The runway to expand in tier-2 Chinese cities, as well as across Europe (only 48 stores in EMEA presently, with huge untapped markets like France at just 6 stores) is enormous. Management knows this: in 2024 they opened 56 net new stores globally (14 of which were converting Mexico franchise stores) and plan 40–45 more in 2025, with roughly two-thirds of new openings slated outside North America. They even announced entry into new countries like Spain, Italy (ahead of the 2026 Olympics), and upcoming expansions in untapped markets—including the launch of franchise stores in India. This is growth that can sustain high-teens international CAGR for years.

Another tailwind: the athleisure trend is global and still in early innings abroad. In many international markets, the idea of wearing yoga pants or joggers as everyday attire became mainstream later than in North America. So LULU benefits from a secular trend of more people adopting health & wellness lifestyles and casualization of fashion. Analysts project the sportswear market globally to grow ~3-4% annually, but LULU is clearly outpacing that by multiples in its focus regions. For example, Europe’s athletic apparel per capita spend trails the U.S., implying catch-up potential. LULU doesn’t need unrealistic market share to thrive – it just needs to continue executing and leveraging its brand appeal to capture a fraction of the large markets in front of it. We believe the international segment could feasibly reach ~30%+ of total revenue by 2026 (on a much larger total base), given the current trajectory. That mix shift is important because international growth not only adds revenue, but also improves diversification and reduces over-reliance on the U.S. economy.

Despite these facts, many U.S. investors and analysts give international growth a cursory nod at best. It’s often mentioned as an aside (“LULU is expanding globally”) but not truly modeled for its profound impact. We think this is a major oversight. International momentum is a key to LULU’s next leg of growth and a big part of why we’re bullish. As a thought experiment, if LULU were a China-focused story (like some high-flying consumer brands that IPO in the U.S.), its 40% growth in China would be a headline driver. But because LULU is still thought of as a North American retailer, the market hasn’t fully re-rated it for the global angle. That’s an opportunity. Every quarter that LULU posts ~30–40% international increases (and the company has done so consistently), confidence in the growth plan should increase – eventually demanding a higher multiple for the stock.

In conclusion, global market expansion is transforming Lululemon. China is emerging as a second pillar nearly as important as the U.S., and Europe/Rest-of-world is adding meaningful incremental growth. By 2026, LULU’s goal of doubling overall revenue to $12.5B looks achievable largely because of international gains (as well as men’s business growth, our next topic). The undervaluation of LULU today fails to account for this rich vein of international growth that’s being tapped. Investors who recognize the international story are effectively getting a high-growth global retail business for free at the current valuation.

6. Menswear and New Categories (Footwear): Growth Levers Hiding in Plain Sight

Executive Summary: Lululemon is no longer just “yoga pants for women.” The company’s strategic expansion into menswear and other product categories (like footwear) is yielding impressive results, adding new layers of growth that many skeptics underrate. Men’s apparel at Lululemon has been growing faster than women’s, on track to eventually rival the size of the women’s business. In 2024, men’s revenue jumped +14% (versus +9% in women’s), continuing years of double-digit menswear growth. Men’s now accounts for ~24% of LULU’s revenue, up from ~20% a few years ago, and the mix is rising toward management’s goal of parity with women’s long-term. Meanwhile, Lululemon’s foray into footwear – a natural adjacency in the athletic space – has been well-received, with the company launching its first women’s running shoe in 2022 and its first-ever men’s footwear line in 2024. These initiatives expand LULU’s addressable market (TAM) by billions of dollars and deepen customer engagement (a loyal LULU apparel customer is likely to try LULU shoes, for example). The upside from fully scaling these new categories is substantial and not yet reflected in the company’s overall valuation, in our view.

Men’s Business: From Niche to Mainstream. It’s worth recalling that Lululemon started as a women-focused yoga brand. The fact that nearly a quarter of sales are now menswear is a testament to the brand’s successful crossover. Products like the ABC pants (LULU’s famous “anti-ball crushing” chino-like pants for men) and the Metal Vent training tops have become staples in many men’s wardrobes – prized for comfort and versatility. LULU’s men’s segment has grown at roughly a 20%+ CAGR over the last five years (management even doubled its men’s revenue from 2018 to 2022, hitting an initial goal early). Now under the Power of Three ×2 plan, they aim to double men’s again from 2021 to 2026. The trajectory is strong: for instance, in Q2 2023, men’s business grew in the mid-20s percent, significantly outpacing women’s, as noted on earnings calls. By the end of 2024, we estimate men’s annual revenue was in the ~$2.5 billion range (roughly 24% of $10.6B total). Importantly, the men’s customer profile expands LULU’s reach. More than half of men shopping at Lululemon are new to the brand (didn’t previously buy women’s products for a partner, etc.), so this isn’t just upselling existing female customers – it’s capturing a new demographic.

The runway in men’s is huge: Nike and Adidas each do tens of billions in men’s sales. LULU’s product development for men is hitting its stride, with expansions into golf polos, outerwear, swim, and casual streetwear (the “License to Train” line, etc.). LULU is also leveraging partnerships to boost men’s awareness – note that they signed top golfer Max Homa and rising tennis star Frances Tiafoe as ambassadors in 2024, putting the brand in front of a predominantly male sports audience. The collaboration with the NFL and NHL (discussed later) is also explicitly aimed at courting male sports fans with team-branded Lululemon gear – including athlete ambassadors such as D.K. Metcalf. These moves address a historical gap: brand awareness among men lagged women. Now that’s changing – ask a random college-aged male about Lululemon and chances are he’ll mention the super-comfortable ABC pants or shorts that “everyone is wearing at the gym.” In a telling anecdote, Lululemon’s line for men’s boxer briefs (introduced quietly) became a top seller, illustrating how once men discover LULU quality, they want it in all categories. We foresee men’s share of LULU’s revenue climbing to 30%+ in the next few years, which effectively means hundreds of millions in incremental revenue on top of women’s growth. This is an internal growth vector that many don’t fully credit – but it is analogous to when Nike successfully pushed into women’s apparel two decades ago, creating a new multi-billion line of business.

Footwear: Stepping into a New $300+ Billion Market. Lululemon’s move into footwear is a logical extension: its customers trust the brand for apparel, so why not shoes? Still, the company approached it methodically. Rather than rushing to market, LULU spent years on R&D to create differentiated products. In March 2022, they debuted the “Blissfeel” – a running shoe specifically engineered for women’s feet (a shot across the bow of traditional shoemakers who historically designed for men first). The Blissfeel launch was a success – often selling out in popular sizes, and praised for its comfort. Building on that, LULU rolled out additional styles: Chargefeel (cross-training shoe) and Strongfeel (for gym/strength). Having proven demand and gathered feedback from women, Lululemon took the major step in 2024: launching its first men’s shoes. The “Chargefeel 3” and “Restore” were among early men’s training shoes, and notably the “Beyondfeel” running shoe for men launched in March 2024 alongside a unisex sneaker called “Cityverse” in February 2024. The Beyondfeel is LULU’s first men-specific running shoe, and early reviews cited by GQ and others noted its quality and style for everyday runs. Essentially, LULU is following a playbook: start in women’s footwear (underserved by performance brands), learn and refine, then tackle men’s (a larger market). Footwear is a tough category – dominated by Nike, Adidas, and specialized players – but LULU doesn’t need huge market share to move the needle. Even a low-single-digit share of the athletic footwear space would equate to several billion dollars in sales. For context, On Holding (maker of On Running shoes) is expected to hit ~$2.8B revenue this year and trades at a rich valuation, largely on optimism for its shoe growth. If LULU’s footwear initiative can capture the devotion of just its existing loyal apparel base, it could build a ~$500M+ footwear business in a few years. This is essentially upside optionality that current valuations do not bake in.

Management is optimistic but prudent on footwear. They have said the footwear rollout is a long-term project – they aim to “create an iconic footwear business”, not chase short-term volume at the expense of brand (so they aren’t flooding the market or doing heavy discounts). Already, footwear has contributed to attracting new customers, especially men, into Lululemon stores (“come for the shoes, stay for the ABC pants”). It also increases share of wallet for existing customers. One can imagine LULU in a few years selling head-to-toe solutions: top, bottom, underwear, socks, and shoes – all with the Lululemon logo. Each additional category makes the brand stickier.

Outside of men’s and shoes, LULU has a few other nascent categories worth mentioning: personal care products (like deodorants, dry shampoo), which are very small but speak to lifestyle brand extension; and a recently teased foray into pickleball equipment (they partnered with a pickleball paddle maker for a co-branded product in 2023). These are not likely to move the financial needle near-term, but they indicate LULU’s willingness to carefully experiment at the edges of its brand permission.

To sum up, Lululemon’s growth is not confined to expanding geographically – it’s also expanding horizontally into new product areas. The men’s business is flowering, addressing a market easily as large as LULU’s historical women’s niche. The footwear push, while still small, holds significant promise and can leverage the brand’s textile and design expertise (for example, LULU’s Slide sandals quickly became popular, suggesting the brand can credibly play in casual footwear). Importantly, these efforts are still gaining momentum. We believe the market doesn’t fully appreciate how much growth is embedded here: many analysts model men’s and footwear conservatively, perhaps due to cautious management commentary, but if men’s keeps outpacing and any footwear style becomes a hit, top-line estimates could prove too low.

Lululemon’s ability to broaden its portfolio without diluting brand equity is a bullish signal about management’s execution. Few companies successfully cross the gender divide or break into shoes (recall Under Armour’s struggles in women’s, or others failing in footwear), but LULU is doing it methodically. This multi-pronged growth – women’s, men’s, international, shoes – gives LULU multiple shots on goal. Even if one area softens temporarily, others can pick up slack. It’s a hallmark of a well-rounded growth story, not a one-trick pony. Next, we discuss how LULU’s recent strategic pivots and partnerships (including with former competitor Peloton, and major sports leagues) further set the stage for long-term success.

7. Strategic Pivots and Partnerships: Turning Past Blemishes into Future Opportunities

Lululemon’s management has demonstrated agility by pivoting away from missteps and forging strategic partnerships to expand the brand’s reach. Three major recent moves stand out: (1) the decision to exit the hardware side of Mirror and partner with Peloton for fitness content, (2) new partnerships with the NFL and NHL (via Fanatics) to produce co-branded fan apparel, and (3) new $300/year credit partnership with Amex Platinum cardholders. These actions highlight a company that is learning from mistakes and creatively leveraging its strengths. Exiting Mirror’s hardware business cuts losses and frees LULU to focus on what it does best (apparel/community), while teaming with Peloton turns a former rival into an ally and opens a new channel for LULU apparel. Likewise, collaborating with sports leagues taps into massive fan bases and invites a new demographic to experience Lululemon, all with minimal inventory risk (thanks to Fanatics’ distribution). We view these strategic pivots as savvy and underappreciated catalysts for LULU’s brand and financial performance.

LULU’S $500M Mirror Mistake:

Lululemon’s “Mirror” interactive fitness device (now discontinued) being used for at-home strength training. LULU took swift action to pivot away from hardware and focus on core apparel and community offerings.

Let’s start with the Mirror saga and Peloton partnership. After spending $500M to acquire Mirror in 2020, Lululemon found itself in the crowded at-home fitness market just as gyms were reopening. By 2022, Mirror sales lagged and LULU wisely acknowledged the sunk cost. Rather than stubbornly doubling down, management made the tough but correct call to cut bait. In September 2023, LULU announced it would discontinue Mirror device sales by year-end 2023 and shut its digital-only content tier. Simultaneously, Lululemon struck a five-year global partnership with Peloton – a move that seemed to surprise the market (Peloton’s stock popped on the news). Under this deal, Peloton becomes LULU’s exclusive digital fitness content provider, and LULU in turn becomes Peloton’s primary athletic apparel partner. This is elegantly symbiotic. For LULU: it instantly solves the content problem – instead of pouring money into creating workouts for Mirror, LULU can now offer its Lululemon Studio members access to Peloton’s vast library of classes (cycling, yoga, strength, etc.). In fact, from Nov 1, 2023, Mirror (Studio) subscribers automatically got Peloton content as part of their membership, ensuring a smooth transition with no service loss. LULU also avoided stranding existing Mirror customers – it’s continuing to support the devices and honor subscriptions, but without the heavy ongoing cost of content creation. For Peloton: they cease their own apparel attempts and instead partner with the most coveted brand in yoga/athleisure, Lululemon, selling co-branded LULU × Peloton workout gear in Peloton’s channels. Peloton instructors also become LULU ambassadors, linking the communities. This effectively ends the earlier feud (Peloton had even been sued by LULU for copying designs in 2021]) and turns a potential competitor into a collaborator.

Why is this Peloton deal bullish for LULU? Two reasons: cost savings and new revenue. On cost, LULU immediately halts the bleeding from Mirror. They laid off 120 employees in the Mirror division in mid-2023, and by Q3 2023 took a one-time inventory write-down of ~$24M and a post-tax $72M impairment to clear it off. Going forward, no more production costs, no more content spend for digital fitness – Peloton handles that. Wedbush’s retail analyst applauded this, saying “it ends the saga of one of LULU’s few strategic missteps… $500M acquisition of Mirror… [and] there’s an opportunity to generate incremental revenue from being Peloton’s apparel partner”. That incremental revenue is key: Peloton has ~7 million members, many of whom are hardcore fitness enthusiasts squarely in LULU’s target market. Now Lululemon is Peloton’s exclusive apparel partner, meaning when those members want branded workout clothes, they’re directed to LULU’s product (with Peloton logo alongside). Starting October 2023, LULU x Peloton co-branded apparel is sold in Peloton stores and on Peloton’s website across the U.S., UK, and Canada. This opens a fresh distribution channel for LULU product without needing new LULU stores. It also introduces LULU to Peloton’s loyal user community in a positive light, potentially winning new customers. While financial details weren’t disclosed, we suspect LULU likely gets a wholesale-like arrangement for supplying these co-branded goods (Fanatics is handling distribution for the league deals, but Peloton deal seems direct). Even if modest, it’s a nice tailwind – essentially found money – atop eliminating the Mirror drag. Furthermore, aligning with Peloton bolsters LULU’s credibility in digital fitness without needing to build it all in-house. Peloton’s content is top-tier; LULU can still offer a “Studio” membership experience (with Peloton’s classes) and use it to engage its 28M members by cross-promoting apparel and events. It’s turning a negative (Mirror) into a neutral or even slight positive, which is exactly what good management does.

Now on to the NFL and NHL licensed apparel partnerships, which represent an ingenious way for LULU to court new customers (especially men) and drive additional sales with minimal capital outlay. In October 2024, Lululemon announced a deal with Fanatics and the NHL to create a line of premium fan apparel for 11 NHL teams initially, expanding to all 32 teams by the 2025-26 season. This was followed in October 2025 by the announcement of a similar partnership with the NFL for all 32 football teams. These collections feature popular Lululemon styles (like the Define jacket, Scuba hoodie, Align leggings for women; and the Steady State joggers, Metal Vent tech shirts for men) emblazoned with team logos and colors. Essentially, LULU is bringing its quality and aesthetic to fan gear – a segment historically dominated by less fashionable merch. The products are sold on NFLShop.com, team stores, Fanatics’ sites and Lids stores, leveraging Fanatics’ massive sports retail network. Fanatics, a powerhouse in sports licensing, handles a lot of the heavy lifting (distribution, likely inventory management to some degree). This is crucial: LULU gets the upside of selling into a passionate fan market without having to rely solely on Lululemon stores to move team-specific inventory (which could be risky if a certain team’s items don’t sell out). Fanatics being involved suggests LULU’s inventory risk is mitigated – possibly Fanatics places orders and handles unsold stock akin to a wholesale partner.

We view these league collaborations as a win-win. For LULU, it’s immediate legitimacy in the sports fan domain and access to a predominantly male audience that may not have considered Lululemon before. The NFL partnership news alone sent LULU shares up ~5% in one day (although they later retraced lower), indicating investors recognize the significance. The NFL is the most watched and monetized sport in North America, and LULU is now an officially licensed partner – notably the first time Lululemon has offered any team-licensed products. That’s a big deal: it means the leagues trust LULU’s brand enough to let it make fan apparel, and it means sports fans will now see the Lululemon name in contexts they never did (like NFL online shop). Imagine the gift-giving scenarios too – e.g., a man who is a huge Dallas Cowboys fan gets a Cowboys-branded Lululemon hoodie; he experiences LULU’s quality and may become a direct customer. Meanwhile, LULU loyalists who happen to be sports fans are thrilled they can rep their team without sacrificing style or comfort. We expect high demand particularly for teams in cities where LULU is popular. LULU’s President summed it up: “true NFL fans wear their pride...we looked to honor that devotion and are thrilled to be part of that ritual”. This emotional connection – linking LULU gear to team loyalty – could pay dividends in brand affinity.

Financially, even a modest penetration of the fan apparel market could add tens of millions in revenue. Fanatics sold $3+ billion of licensed sports merch in 2022; if LULU grabs a slice of premium sales for 32 NFL teams, it could be meaningful. But even more important is the strategic angle: it’s effectively low-cost customer acquisition. LULU doesn’t need to open new stores or big marketing campaigns to reach these folks; the NFL/NHL logos draw them in. It’s savvy marketing disguised as product expansion.

Another underappreciated strategic win is Lululemon’s September 18, 2025 partnership with American Express Platinum, which effectively turns Amex into a recurring, third party demand engine for LULU. As part of the Platinum “refresh,” Amex raised the annual fee from $695 to $895 but added over $3,500 of annual value, including a $300 Lululemon credit – delivered as up to $75 in statement credits per quarter for eligible purchases at U.S. Lululemon stores (excluding outlets) and on lululemon.com, with enrollment required. Lululemon and Amex both prominently market the partnership; LULU’s own site positions it as “Move into more with lululemon and the American Express Platinum Card,” underscoring that the brand has been chosen as the athletic wear partner in Amex’s revamped wellness centric benefits stack. Travel/points outlets immediately highlighted the Lululemon credit as one of the marquee new perks that helps offset the higher fee, and dedicated guides now coach Platinum holders on “best ways to spend” the $75 quarterly credit — effectively sending a steady stream of affluent, high intent shoppers directly into LULU’s ecosystem.

Crucially, the economics are attractive. The benefit is provided as a statement credit from Amex to the cardmember, so from Lululemon’s perspective these are standard full price transactions at full price channels. The quarterly cadence of the credit encourages habit — cardholders are nudged to visit lululemon.com or a store every three months or forfeit value — which shows up clearly in the data: Similarweb/Bloomberg traffic analysis indicates that following the launch, weekly visits to lululemon.com stepped up by roughly 25% year over year, or about +2 million incremental visitors per week, while Nike and Under Armour web traffic stayed flat to negative over the same window. In practical terms, Amex is now supporting a recurring influx of high income customers to LULU’s highest margin channels. Converting even a modest share of those Amex sourced customers into repeat customers should translate into meaningful incremental revenue over time — and further entrench Lululemon as the default premium athleisure brand for the very demographic that premium card issuers are fighting hardest to keep.

One more strategic note: LULU also quietly acquired its Mexico franchise operations in 2023, converting Mexico to a company-operated market. This shows willingness to take direct control when appropriate (in Mexico’s case, the market proved strong enough). They similarly might consider strategic acquisitions if any complementary brand made sense, but given Mirror’s lesson, they’ll be cautious. We doubt any large M&A is on the horizon – and none is needed – but small partnerships like the ones above can amplify growth.

In sum, Lululemon’s management deserves credit for confronting challenges head-on and turning them into opportunities. The Mirror fiasco could have cast a long shadow; instead, they decisively wrote it down and leveraged Peloton’s strength to fill the gap, simultaneously boosting apparel distribution. The venture into licensed sports gear could have been outside LULU’s comfort zone; instead, they partnered with an expert (Fanatics) and are meeting fans on their turf, literally. Similarly, with Amex Platinum, LULU has secured one more best-of-breed corporate partner. These moves demonstrate an adaptable, strategic mindset at the top – one that short-sellers often claim retailers lack. Far from being complacent, LULU is proactively finding new ways to grow and engage customers. This bodes well for long-term shareholder value, as it suggests a management team not content to rest on laurels, but also wise enough to partner where it benefits.

Next, we step back and look at LULU’s overall financial profile in context – comparing it to peers and highlighting the exceptional returns it generates – before wrapping up with our view on the stock’s upside and some pointed questions we think management should answer to further enhance shareholder confidence.

8. Financial Outperformance and Balance Sheet Strength: A Quality Compounder

By every key financial metric, Lululemon outshines its apparel peers. It boasts higher growth, fatter margins, and better returns on capital than competitors like Nike, Adidas, or Athleta (Gap). LULU’s balance sheet is debt-free and cash-rich, providing stability and optionality that many retail peers lack. The company’s disciplined stewardship of capital – investing for growth while returning excess cash via buybacks – aligns management’s interests with shareholders’. In this section, we underscore how Lululemon’s financial quality stands in stark contrast to its discounted valuation, making the long thesis even more compelling. LULU isn’t just another retailer; it’s a cash-generative, high-ROIC compounder with characteristics more akin to a tech platform than a mall store.

Let’s visualize the superiority:

These numbers illustrate a fundamental point: Lululemon’s business model is extraordinarily efficient and profitable. A dollar of revenue at LULU produces more gross profit and more operating profit than a dollar of revenue at almost any peer. This is partly due to the direct-to-consumer model, partly due to brand pricing power, and partly due to superb execution in operations (inventory, sourcing, etc.). It’s also why LULU can continue to invest in growth without sacrificing margins – there is ample “fuel” in the form of gross profit to fund new stores, R&D for new products, etc.

One might wonder if LULU’s superior margins are sustainable or if they will revert downwards as competition heats up. We believe they are sustainable, if not improvable, because LULU has structural advantages: a) Vertical retail – owning its stores and e-commerce means no wholesale markdowns, better control over pricing and branding, and higher average unit revenue. b) Premium positioning – LULU doesn’t compete on price; its customers are willing to pay $118 for leggings or $128 for a hoodie, and this insulates margins. In fact, in periods of inflation LULU can raise prices selectively (as seen in 2022–23) and consumers largely accept it. c) Economies of scale – as LULU grows internationally and in men’s, it leverages existing design and distribution infrastructure. We saw this in 2024 when, despite only ~10% sales growth, operating profit grew 17% and op margin expanded – indicating efficiency gains. d) Low promotional activity – LULU’s approach is to produce products in the right quantities to sell mostly at full price. Its “We Made Too Much” clearance section is relatively limited, preserving margin. All these factors give confidence that LULU’s margin profile isn’t likely to erode toward peers’. If anything, there’s room to optimize costs (for example, now that supply chain costs are normalizing, LULU expects slight tailwinds to gross margin from lower air freight usage and FX may drive incremental support).

Turning to the balance sheet, Lululemon is in a position most companies would envy. It carries no long-term debt. The only liabilities of note are lease commitments for stores, which are easily covered by store cash flows. At the end of Q3 2023, LULU had $1.1B in cash. By year-end (Jan 2025), after heavy buybacks, cash was slightly lower but still around $800M and a large untapped credit revolver stands by for any needs. This balance sheet strength means LULU has flexibility: it can opportunistically repurchase shares (which it’s doing), invest in supply chain improvements (like opening a 980k sq ft distribution center in Ontario in 2022 to support growth), or consider strategic acquisitions/partnerships from a position of strength. It also provides resilience; if a recession hit and sales temporarily slowed, LULU isn’t at risk of a liquidity crunch or onerous interest expense – they could even lean in and gain share while weaker competitors pull back or accelerate share repurchases.

Another point often overlooked: shareholder returns via buybacks are effectively boosting LULU’s EPS growth above net income growth. In 2024, LULU repurchased ~$1.6B of stock, and authorized a further $1B. The share count has been coming down – LULU bought back 1.5M shares in 2023 and 5.1M in 2024. With ~118M shares outstanding recently, that’s over 5% of the float repurchased in two years. It’s notable that even as the company continued to expand (capex for new stores, etc.), it generated enough excess cash to do this. That tells us LULU is now at a scale where it can be a growth company and a capital return story simultaneously – a rare transition point that often marks a stock’s move from a pure growth multiple to a higher “quality” multiple (once the market trusts the capital allocation). We think LULU is on the cusp of this inflection. If the company keeps retiring 2-4% of shares per year and growing net income double-digits, EPS could easily grow 15-20% annually without heroic assumptions. That warrants a far higher multiple than ~13× forward earnings.

Management’s alignment with shareholders is decent, though insider ownership could be higher (founder Chip Wilson retains a stake – he had about 8% as of 2021 after selling down from ~28%, and has been an outspoken voice for maximizing value). Executives are compensated in part on performance metrics like revenue and operating income growth. We have generally been impressed that LULU has not succumbed to pressures to chase unprofitable growth or dilute the brand for short-term sales. The Mirror deal was a misstep, yes, but they didn’t hesitate to reverse course. Now, management’s tone is one of focus and execution. CEO Calvin McDonald often reiterates they are “playing the long game” with innovation and international, which is what we want to hear. Given the strong results, we have no reason to doubt their strategy, but we will pose some questions in the final section about areas we think management could be even more transparent or aggressive to unlock value.

Finally, comparing LULU to other companies outside apparel highlights its unique position. LULU’s ~20% operating margins and 25%+ ROIC are reminiscent of top-tier consumer staples or tech companies rather than a typical retailer. It calls to mind Apple’s retail metrics or Starbucks’ pre-pandemic store economics. Yet LULU is valued at a fraction of those companies’ multiples – again reflecting a disconnect that we believe will close as LULU continues to deliver. It’s also instructive that some highly respected investors see value: Recently, Pershing Square’s Bill Ackman took a significant position in Nike, citing long-term brand strength. If one were to compare, LULU offers similar brand strength with even better growth, yet is cheaper. Scion Asset Management, the investment firm led by Michael Burry, has disclosed a long position in Lululemon, adding a high-profile value / activist investor to the company’s shareholder base. We wouldn’t be shocked if additional activist or high-profile value investors eventually target LULU if the market doesn’t wake up (outside of the low valuation, Chip Wilson’s presence and prior activism might support this). Alternatively, take-private LBO math comfortably underwrites a 20%+ IRR with modest debt assumptions as long as LULU remains under $200/sh (IRR could be higher if Chip Wilson or another large-holder rolled their equity stake into a take-private). In any case, LULU has all the financial hallmarks of a best-in-class operator in a growth industry – precisely the kind of company that over time tends to vastly outperform the market.

To wrap this financial overview: Lululemon is a high-growth, high-margin, high-returns company with an A+ balance sheet. Such companies are rare, and rarer still are they available at a bargain valuation. LULU’s numbers justify a premium – yet it trades at a discount. This is why we are pounding the table. In the final section, we tie everything together with our outlook on the stock’s upside and, importantly, pose some constructive questions for LULU’s management and board. These questions are aimed at ensuring that the company’s actions fully align with unlocking the substantial shareholder value we see on the table.

9. Upside Potential and Conclusion: A Severely Mispriced Winner

We believe LULU’s stock has significant upside – potentially 50% to 100% over the next 1-2 years – as the company’s performance forces a market re-rating. Our conservative valuation scenario, assuming modest growth and a still-below-historical multiple, yields a stock price well above current levels. In a bullish scenario (steady double-digit growth, successful new categories, and multiple expansion toward peers), LULU could approach or surpass its previous highs, delivering a doubling from the recent ~$170 share price. The risk/reward, in our view, is heavily skewed to the upside given LULU’s strong fundamentals and undervaluation. We conclude that Lululemon is a high-quality compounder temporarily misunderstood by the market, and as clarity returns, patient investors stand to be richly rewarded. This is a call not just for investors to recognize LULU’s value, but for LULU’s own leadership – including the Board and Executive teams – to take proactive steps in highlighting and enhancing shareholder value (as outlined in our questions for management).

Let’s outline a simple valuation to anchor the upside. Lululemon guided FY2025 (calendar 2024) revenue to ~$10.6B which it achieved, and analysts expect FY2026 (calendar 2025) revenue around $11.5B–$12B (roughly 8-10% growth). Given current trends (international +30%, men’s + mid-teens, slight U.S. improvement), this is achievable if not beatable. Assuming LULU hits $12B revenue in FY2026 and maintains an operating margin ~23-24%, that’s operating income of ~$2.8B. Tax ~29%, net income ~$2.0B. With the share count already shrinking (say ~115M by then after buybacks), that’s EPS of about $17–$18. Now, what multiple does a company with LULU’s profile deserve? Historically, LULU traded 25-35× earnings when growth was higher; Nike trades around 25× forward despite its recent struggles; the S&P500 is ~18×. Given LULU will still be growing high-single/low-double digits with a premium brand and possibly initiating dividends by then, we argue for at least a market multiple or slight premium. At 20× $17, the stock = $340. At 25×, it’s $425. Discount that back a bit or apply a probability, and it’s evident that the stock should be well north of $300 in a year or two, barring a severe recession. Even a very cautious case: say growth stalls at 5% and EPS is $15, and it only gets a 15× multiple – that’s $225 (still ~35% above today). So downside appears limited relative to upside, considering the balance sheet could support buybacks even in a downturn.

Another angle: LULU’s current EV/EBITDA ~7x is simply too low. Quality consumer names (think Starbucks, Estee Lauder, etc.) often trade at mid to high teens EV/EBITDA. Even an expansion to 12x (justifiable given 23% margins and 10% growth) would raise the EV by ~70%, implying the stock similarly. Some may counter that as a “maturing” retailer LULU should have a low multiple. We reject that – LULU is not a mall-bound chain facing decline; it’s an evolving global brand with avenues for decades of growth (international, category, digital). If anything, it should eventually be valued more like a premium consumer staples company (think Nike or Coca-Cola multiples) given its loyal customer base and pricing power.

The upcoming catalysts that could unlock this value include: Acceleration in China (potential double-digit comp quarters from that region, which management might disclose if impressive); Gross margin expansion above 60% (quite possible as mix shifts to direct and air freight costs fully normalize, which would boost EPS); Continued buybacks (shrinking float, increasing ownership per share of the company’s earnings); and simply time/data – as LULU strings together a few more quarters of hitting targets, the skepticism should abate. We note that the stock’s slide in 2025 came as the market lost “faith” in guidance – ironically just as margins rebounded and Mirror ended. Once investors realize that the post-COVID hangover is done and LULU is still delivering mid-teens EPS growth, we expect multiples to expand from the current trough.

There is also a wildcard: founder Chip Wilson.

He has historically been vocal when he felt the company was mismanaged or the stock undervalued (famously agitating in 2014 and writing open letters). While Chip stepped away from board roles years ago, he remains an influential figure and large shareholder. We suspect he, too, recognizes the current undervaluation. In the past, Chip criticized product quality control and urged the company not to stray from its DNA. In September 2025, Chip took a full-page ad in the WSJ calling for change at LULU. If he were to continue speaking up now, it might be to encourage a sharper focus on innovation and perhaps even suggest strategic moves (e.g., exploring whether LULU could unlock value via spinoffs or increasing buybacks). His involvement could act as a backstop, as management would not want a public dispute. Alternatively, he could partner with an activist fund or private equity to drive change or take the company private. It’s speculation, but a positive one: a founder who cares about maximizing the brand and shareholder value is in the wings.

WSJ ad shown left.

In conclusion, Lululemon Athletica represents a compelling long investment as an undervalued leader with multiple growth cylinders firing. The market’s overly cautious stance – essentially pricing LULU like a no-growth or risky venture – is fundamentally at odds with the vibrant reality of LULU’s operations. We see this as an opportunity to be greedy while others are fearful. Rarely can one find a company of LULU’s caliber (global brand, high margins, solid growth runway) at such a modest valuation. We believe a combination of continued execution by the company and a push from engaged shareholders (including activists or the founder if needed) will close this gap.

To that end, we present below a series of constructive, hard-hitting questions for Lululemon’s management and board. These questions are intended to prompt clear answers and actions that will reassure investors and potentially catalyze strategic moves to unlock value. They reflect the kind of accountability that short-focused activist reports demand – except here, our aim is to drive positive change and recognition of LULU’s value. By addressing these questions, Lululemon’s leadership can help ensure that the company’s outstanding performance translates into outstanding stock performance for its owners.

10. Questions for Lululemon’s Management and Board

We challenge Lululemon’s leadership to address the following critical questions to maximize shareholder value and dispel lingering concerns. In true activist fashion, we pose direct questions covering strategy, capital allocation, and execution. Clear, forthright answers (and corresponding actions) will signal management’s commitment to realizing LULU’s full potential:

  1. North America Re-Ignition: After low Americas growth in 2024, what is management’s plan to re-accelerate North American sales? Can you provide specific initiatives (product innovation, marketing campaigns, store experience upgrades) to drive renewed growth in your home market without eroding margins? How will you continue gaining market share in a competitive U.S. landscape?

  2. International Acceleration: Given the tremendous success in China, will you consider increasing the pace of international store openings or partnerships to capitalize on demand? For example, can expansion in high-potential markets (e.g. more stores in China’s Tier 2 cities, entry into India or more of EMEA) be accelerated beyond the current plan of 40-45 new stores in 2025? Why the franchise model for India? What safeguards ensure you maintain brand cachet and execution quality as you scale globally?

  3. Margin Enhancement: With gross margin back near 60% and adjusted operating margin ~23-24%, what are the targets or opportunities for further margin expansion? Can you quantify benefits from supply chain efficiencies (e.g., reduced air freight usage or distribution optimization)? Will you commit to a long-term operating margin range (say mid-20s%) to give investors confidence that profitability will remain a priority even as you invest for growth?

  4. Inventory Discipline: Inventory issues plagued many retailers recently. How will Lululemon ensure it does not repeat the over-inventory issues of the past? Can you share targets for inventory growth versus sales growth, or inventory turnover ratios, that management will adhere to? What systems or process improvements have been implemented to better align inventory with demand (especially as you expand product lines and regions)?

  5. Product Quality and Innovation: Founder Chip Wilson has emphasized product quality as paramount. What are you doing to address any perceptions of declining quality (e.g., reports of fabric changes or durability concerns)? Are product returns or defect rates tracked and trending favorably? Moreover, how are you fueling the innovation pipeline – can you maintain Lululemon’s reputation for cutting-edge fabrics and functionality (e.g., like the recent enzymatically recycled nylon initiative)? We’d like to hear about specific upcoming product innovations that exemplify LULU’s leadership.

  6. Footwear Strategy: Now that you have launched women’s and men’s footwear, what constitutes success in this category and over what timeframe? How will you measure the traction of your footwear segment (e.g., internal sales targets or market share goals)? At what point would you consider more aggressive investment (or conversely, a pivot) in footwear? Essentially, how big do you expect the footwear business to be in, say, 3 years, and what’s the roadmap to get there – new models, distribution channels, athlete endorsements?

  7. Men’s Business Goals: You set and achieved a goal to double men’s between 2018-2023; what is the updated goal for men’s segment over the next few years? Will you begin disclosing the men’s vs women’s revenue split regularly (as you did in the annual report) so investors can track progress? Additionally, what marketing efforts are underway to continue increasing brand awareness among men (for example, will you consider larger-scale advertising or sponsorships in men’s sports beyond the recent ambassador additions)?

  8. Capital Allocation & Buybacks: With $1+ billion in cash and strong cash flow, will you maintain an aggressive share buyback program at these undervalued prices? You repurchased 5.1M shares for $1.6B in 2024 – will you consider utilizing the full remaining authorization (and even expanding / accelerating repurchases) given the stock’s decline? Additionally, has the Board discussed initiating a dividend to return cash to shareholders, or do you prefer buybacks exclusively? We seek assurance that excess cash will be used for shareholder benefit, not left idle or spent on another risky acquisition (Mirror).

  9. Founder and Board Engagement: Founder Chip Wilson remains an influential shareholder and voice. How is the Board engaging with Chip and leveraging his insight on product and brand? Would the Board consider adding members with deep product/design expertise or entrepreneurial track records to further strengthen oversight as the company grows in complexity (international, new categories)? Simply: is there an open line of communication between LULU and Chip to address his legitimate concerns and unlock shareholder value?

  10. Communication and Guidance: LULU’s stock dropped after some recent earnings due to cautious guidance. How can management improve communication with investors to avoid surprises and better convey the underlying health of the business? For instance, would you consider providing more granular metrics on quarterly calls to highlight the strong areas (e.g., men’s, footwear) and give context to softer spots? Also, as we lap the Mirror charges, will you commit to a cleaner reporting of adjusted results so the core performance is crystal clear? In short, what steps will you take to ensure the market fully understands Lululemon’s growth story and does not undervalue it due to opaque guidance or one-off expenses?

  11. Competitive Landscape and Moat: Finally, how is Lululemon fortifying its moat against rising competition? Are there any plans to broaden the loyalty program into a tiered or paid program that drives even more engagement (e.g., bringing back a premium tier with perks now that Peloton content is in place)? How will you continue to differentiate in an increasingly crowded athleisure market – is it through exclusive fabrics, community experiences, personalization via your guest data? Investors want to know that LULU will remain the leader and not cede ground as others chase the attractive athleisure trend.

We look forward to candid responses from Lululemon’s leadership on these points. By addressing these questions, management can instill greater confidence that the company is not only performing well but also being proactive in maximizing shareholder value. In our view, Lululemon has all the ingredients of a long-term compounder – brand strength, growth avenues, and strong governance – and with sharper execution and transparency, its stock price should eventually reflect that reality. The onus is now on the company to deliver and communicate, and on investors to see through the fog of recent skepticism. Lululemon is a rare asset: a dominant, growing, highly profitable brand hiding in plain sight at a bargain valuation. We are bullish, and we believe the story of LULU’s undervaluation won’t last for long. It’s time for the market to awaken to the real value here.

Disclosure

We are long LULU. This report reflects our opinions and research, which we believe to be accurate. We encourage readers to consider the sources cited and to conduct their own due diligence. We have no business relationship with Lululemon other than as a concerned shareholder. Our aim is to highlight value and advocate for actions that benefit all LULU stakeholders – customers, employees, and shareholders alike. Lululemon’s best days look to be ahead of it, and we are excited to be along for the journey.

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Figma (NASDAQ: FIG) – From Design Darling to Investor Beware

Author’s Note: We are short Figma stock (via long put options) and stand to benefit if its share price declines. All information presented here is derived from public records and sources, which are cited in brackets. We invite readers to review these sources and form their own conclusions.

(I) Key Findings (Overview)

  • Overhyped IPO, Troubled History: Figma – a collaborative design software firm – rode a wave of hype through a July 2025 IPO after a failed $20B acquisition by Adobe. Its stock initially tripled (briefly valuing Figma near ~$70B)[BI], but we believe this enthusiasm ignored serious internal issues and an inflated valuation not supported by peers or fundamentals.

    • Importantly, Adobe’s stock plunged ~17% on the Figma deal announcement[Creative Boost] and rose when the deal was scrapped[Investopedia] – a clear market signal that Figma was overvalued and/or problematic. After announcing the Figma deal in September 2022, Adobe’s 1-day drop represented ~$29.5B of market cap destruction – indicating public shareholders valued Figma at negative ~$9.5B. Adobe stock continued lower in the weeks that followed.

    • After the Adobe deal was terminated, Figma did several private financings in 2024 at $10B and then $12.5B sequentially[Reuters]. The first of these was a January 2024 opportunity for employees to liquidate shares at a $10B valuation (a paltry ~$9B enterprise value after removing the $1B Adobe break fee cash was infused just a month earlier). This was dilutive to junior employee stakes, while concentrating ownership for both Figma’s non-selling, top executives and VC investors purchasing shares in the round.

  • Undisclosed Security Breach: Evidence from X (Twitter) and Reddit indicates Figma’s sales team exploited an internal tool to access private customer file names – essentially peeking into users’ work – in order to pressure them into upgrades. This occurred as late as Oct 2025, months after Figma claimed to have “fixed” a similar privacy lapse[Reddit]. Other customers report they had identical issues months or years earlier. Figma never disclosed this incident to investors or the public, despite SEC rules requiring prompt reporting of material cybersecurity breaches[Harvard Law]. When we raised concern to Figma Investor Relations, the company’s General Counsel responded and indicated plans to conduct only a cursory internal inquiry focused on an individual bad acting sale’s representative. However, CEO Dylan Field quietly acknowledged the cybersecurity issue to a few clients and social media followers—without alerting Figma’s broader user base, market participants, or regulators.

  • Egregious Sales Misconduct: We uncovered a pattern of aggressive and deceptive sales practices at Figma. Customers report relentless high-pressure tactics: account reps tricking admins into “support” calls that turn into pitches, contacting finance departments behind admins’ backs to upsell, weaponizing their own platform’s security as a sales “scare tactic”, auto-charging for “hidden” seat upgrades that users never explicitly approved, duplicate seat charges for the same user, and surprise “true-up” bills that come too late. These are not one-offs – systemic abuse is corroborated by numerous user accounts, suggesting a toxic sales culture prioritizing short-term revenue over ethics[Reddit6][Reddit7].

  • Pre-IPO Financial Gimmicks: In the lead-up to its IPO, Figma pulled multiple levers to inflate its growth metrics. It synchronized the timing of aggressive promotions like free FigJam whiteboard seats and “Dev Mode” trials that later converted to paid plans, delayed the release of “Connected Projects” that would eliminate Figma’s double-charging of freelancer and agency seats, and in March 2025 implemented a hefty 20–35% price hike across core subscriptions[Pricing SaaS]. These moves temporarily boosted Net Dollar Retention (NDR), ARR growth, and revenue. We estimate Figma’s true NDR (excluding one-time boosts, dark patterns, and using a full customer cohort) is well below the IPO’s 132% headline – likely around 105-110% – once normalized for these tricks and dark patterns. Further, after shifting its NDR methodology during the IPO process, the company did not restate past NDR or clearly flag the material change to NDR methodology (e.g. early IPO S-1 excluded customers who fully-churned or down sells below $10k ARR)[SaaS.WTF], leaving investors with at best a confusing picture of this non-GAAP metric and at worst an overly rosy reported figure.

  • Sky-High Valuation & Downside Risk: Even after cooling from its peak, Figma continues to trade at an extreme revenue multiple versus SaaS peers. Its adjusted growth and retention metrics are solid but not unique, and its current valuation prices in years of flawless execution – just as customer dissatisfaction is beginning to snowball. Meanwhile, share lockup overhang looms, with insiders and VCs holding the majority of shares (Index Ventures alone owns ~13%[BI]) – many likely eager to cash out post-lockup. We argue that informed investors (as evidenced by Adobe’s share price reaction) assigned Figma low or even negative real value. Our DCF analysis (see “Valuation Concerns”) indicates significant downside potential for FIG shares. In short, we see Figma as a highly overvalued company propped up by transient pandemic-era success, short-term levers and pull-forward via marketing and price increases, questionable marketing practices, unethical upsell tactics, and opaque or missing financial disclosures. As post-IPO lockup expirations approach, we believe Figma should face increased public market scrutiny.

In the sections below, we detail each of these findings with evidence and analysis.

Figma shares have fallen ~76% from its post IPO peak. (As of: November 4, 2025 | Sourced via: Bloomberg Terminal)

(II) Overview of Figma’s Business and Failed Adobe Deal

What is Figma? Figma is a cloud-based design and prototyping platform that allows teams to collaborate on user interface and product designs in real time. Founded in 2012 by Dylan Field (then a Thiel Fellow) and Evan Wallace, Figma launched to the public in 2016 and quickly gained traction among designers for its browser-based, multiplayer approach to design work[BI]. Over the next decade, Figma raised approximately $333 million in venture funding from top Silicon Valley firms, attaining a $10B valuation by 2021[Reuters]. By May 2024 – after over a year of deal limbo with Adobe ended with Figma receiving a $1B termination fee from Adobe – Figma was first valued at $10B in January 2024 (implying a $9B enterprise value when excluding the $1B cash break fee from Adobe) and then $12.5B (enterprise value of $11.5B net of the $1B break fee) in a May 2024 tender offer – with both rounds allowing employees to cash out shares[Reuters][Reuters].

Adobe’s attempted acquisition: In September 2022, Adobe (NASDAQ: ADBE) shocked the tech world by announcing plans to acquire Figma for $20 billion in a cash-and-stock deal. The offer (roughly 50× Figma’s then-annual revenue) was seen as staggeringly high, and Adobe’s own investors immediately registered their disapproval – Adobe’s stock plummeted on the news[Creative Boost], erasing nearly ~$30B in Adobe’s market cap in a single trading session on September 15, 2022 (far more than Figma’s purchase price—implying a negative value for Figma).

Over the next year, global regulators scrutinized the deal on antitrust grounds, with the EU and UK raising concerns that merging Figma with Adobe would stifle competition[Blog][Blog]. Facing this opposition, Adobe and Figma abandoned the merger in December 2023, with Adobe paying a hefty $1B termination fee to Figma as a breakup penalty[Investopedia][Investopedia]. Adobe’s stock climbed ~1.8% on the official; announcement that the $20B Figma deal was off and had been creeping higher on rumors the deal might get terminated[Investopedia]. In other words, Adobe shareholders celebrated being unable to buy Figma at $20B and were even happy to pay the unusually high $1B (5% of deal value) break fee – a telling indication that informed observers viewed Figma as wildly overpriced and value-destructive at $20B.

Freed from the deal (and flush with a billion-dollar termination windfall), Figma forged ahead on its own. The company launched four new products in 2024 (including a whiteboard tool FigJam, a developer handoff mode, “Figma Slides” for presentations, and other features) – moves that some investors framed as a positive outcome of the failed merger[BI]. By early 2025, Figma boasted strong headline financials: $228M in Q1 2025 revenue (up 46% YoY) and even a quarterly profit of ~$45M[Reuters][Reuters], a rarity for a growth-focused SaaS firm even after pulling out Bitcoin from the PnL. Figma’s customer base had reportedly grown to ~450,000 paying customers (teams and individuals) by 2025, including over 1,000 enterprise customers with $100k+ in annual spend[Blog][Blog] – an enviable roster featuring the likes of Netflix, Stripe, Duolingo**, and more. However, aspects of Figma’s IPO growth story were fueled via short-term levers that at a minimum are unlikely to be repeated and arguably are eroding Figma’s reputation and position in the marketplace.

Note: **Figma’s S-1 highlighted Duolingo as a customer while a Figma lead director (John Lilly) also sat on Duolingo’s board, and Figma added Duolingo’s CEO (Luis von Ahn) to Figma’s board about a week before its IPO. It likely didn’t require separate disclosure, but the Duolingo callout is worth contextualizing: clearly, Figma and Duolingo have close ties.

Summer 2025 IPO: On July 28, 2025, Figma priced its IPO on the NYSE under ticker “FIG”. Initially targeting a ~$18.8B valuation—raising ~$1.2B  with the majority of that amount (around $789 million) going to selling shareholders versus the balance of ~$411M going to the company[Reuters][Reuters]. Strong IPO demand led Figma to boost the offer price to $33/share – above the marketed range[BI]. The stock exploded ~250% on its debut, opening at ~$85 and closing around ~$115[BI][BI]. This exuberant debut briefly valued Figma near ~$70B – almost 3.5× the price Adobe was willing to pay just two years prior[BI]. Such a pop in a long-dormant IPO market made Figma the poster child of a “hot” tech listing, and early investors enjoyed a windfall—at least on paper.

However, since that peak, reality has been setting in. As of this writing, FIG trades around $50 – still well above its $33 IPO price, but far below the frenzied first-day levels. Even at ~$50/share (≈$24.4B market cap), Figma carries a revenue multiple of ~27× trailing sales, an eye-watering valuation by any measure. For comparison, other high-growth, profitable SaaS companies typically trade at 10–15× sales or less in 2025’s market. The bull narrative is that Figma’s best-in-class net retention (132% NDR)[Blog] and ~40–50% recent growth could justify a premium. But as we show, those metrics have been propped up by one-time gimmicks, confusing reporting, and murky and aggressive sales tactics. As these serious concerns around Figma’s business practices and governance emerge – we raise the question of whether this “design unicorn” will stumble now that it’s under the public microscope.

In the sections that follow, we detail our findings on Figma’s undisclosed security breach, sales misconduct, manipulated metrics, and valuation, citing a variety of primary sources (SEC filings, user testimonies, industry analyses, etc.). We recommend that investors exercise extreme caution with FIG – we believe the stock’s downside is substantial.

(III) Undisclosed Cybersecurity Breach: Sales Reps Snooping in Customer Files

Our research uncovered a disturbing privacy breach that we believe Figma has not disclosed via appropriate channels: Figma’s sales representatives have been accessing private customer file metadata – including file names and/or project information via an internal “interface” to identify upsell opportunities, violating user trust, customer contracts, and potentially regulations. Even more troubling, this practice has persisted for 6+ months despite Figma claiming to have fixed the issue months ago.

The “Pistachio” incident (Oct. 2025): On October 30, 2025, the CTO of a cybersecurity startup (“Pistachio”) went public on X (formerly Twitter) with an alarming allegation: a Figma sales rep, in the course of pushing an enterprise plan upgrade, reviewed the names of private design files in the company’s Figma account – without any permission or invitation. After Pistachio had declined to upgrade Figma plans, the rep effectively spied on the team’s Figma usage to gain leverage in the sales pitch (for example, mentioning specific file names to suggest the customer needed the upgraded Figma plan’s “enhanced” security features). We view the Figma Rep’s attempt to upsell a cybersecurity startup by leveraging its own cybersecurity breach as a deeply concerning and manipulative sales tactic—with a clear disregard to customer confidentiality all in the interest of Figma’s own pecuniary gain.

  1. The Pistachio CTO, Zack Korman, blasted this “scare tactic” as a serious breach of trust and a violation of data privacy. (As a cybersecurity professional, one can imagine Mr. Korman’s horror that a vendor’s salesperson was snooping on his company’s internal projects.)

  2. According to posts summarizing the incident on X, Mr. Korman’s public call-out prompted a scramble inside Figma: CEO Dylan Field privately reached out to the CTO to apologize.

  3. On the same X thread, a separate Figma customer publicly reported that this same data-access issue occurred approximately six months ago—well before Figma’s IPO. This customer reported that the company had acknowledged the breach and represented that the access “was an oversight and shut down.” Mr. Korman’s post demonstrates that the practice continued. These customer complaints demonstrate that Figma knew of the unauthorized access before its IPO, failed to disclose it, and misled customers and investors by asserting that the issue was resolved (when it was not).

After learning of this serious cybersecurity incident and apparent lack of governance, we sent Figma’s investor relations a formal request to preserve documents and disclose the scope and internal awareness of a sales interface that reportedly allowed inappropriate access to customer file names, metadata, and potentially other information. Figma’s General Counsel, Brendan Mulligan Esquire, ostensibly launched an “investigation.” Mr. Mulligan, replied via email:

“We received your email… We are aware of the situation that you reported, and we are formally investigating the sales representative’s behavior. We are also reviewing our training and protocols. We will determine the appropriate response at the conclusion of that process.”

Mr. Mulligan’s description of Figma’s investigation appears notably narrow in scope—reportedly focusing on the individual sales representative’s conduct. This may be designed to allow the company to avoid any public disclosure or customer-wide cybersecurity breach notification, treating it as an internal matter resolved by a quick policy reminder or training to sales staff. To date, Figma has issued no 8-K, no blog post, no mention in its SEC filings about this incident. We have followed up with Mr. Mulligan to request a broader investigation:

"However, multiple customers have publicly reported identical experiences months apart—indicating the existence of a shared internal interface visible to sales staff that exposed confidential customer file names and metadata…

Notably, on October 30, 2025, CEO Dylan Field publicly acknowledged on X that Figma identified an internal sales-support “interface” that inadvertently allowed metadata visibility across accounts and described a customer phone call regarding the same. These admissions strongly suggest the problem was systemic, not isolated, and that multiple sales representatives had similar access over an extended period.

Accordingly, please confirm:

1.      Has Figma determined whether the “sales interface” issue constitutes a material cybersecurity incident under Reg S-K Item 1.05 or Item 106?

2.      If so, when was that determination made, and has a Form 8-K or other public disclosure been filed or prepared?

3.      Has Figma’s Disclosure Committee or Audit Committee reviewed potential Reg FD implications of the CEO’s selective communications?"

Why this is material: Figma’s handling of the above incident is highly suspect. Under the SEC’s new cybersecurity disclosure rules (effective 2023), public companies must report material cybersecurity incidents within 4 business days of determining they are material[Harvard Law]. A sales team having backdoor access to customer workspaces – and using that access inappropriately – absolutely could be deemed material. Figma is a cloud software whose reputation hinges on data safety and user trust; an incident that undermines those could “reasonably impact” investors’ view of the company. On Mr. Korman’s viral X thread, customers report identical issues dating from at least 6 months ago. Additionally, numerous customers have expressed their outrage with some indicating they would be cancelling their Figma accounts and others indicating the cybersecurity breach would allow for contractual contract termination—all hallmarks of a material cybersecurity incident. In our view, the first report of this cybersecurity breach and internal “interface” should have been evaluated for S-1 disclosure—at least 6 months ago (before Figma’s IPO) according to customer social media posts. Instead, it appears Figma did not shutdown the interface after the first customer complaints—despite Figma claiming they had to the reporting customer. The narrow investigation described by Figma’s GC may again be attempting to quietly avoid proper disclosure of this ongoing cybersecurity incident. 

Furthermore, if a salesperson could access file names, it implies broader internal access controls problems. It’s unclear how widespread this practice was and Figma seems eager to conduct a narrow investigation unlikely to uncover the truth. We asked ourselves: Was it an isolated rogue rep, or an allowed tactic encouraged from the top? We discovered serious reports on Reddit suggesting cybersecurity and controls issues going back to at least 2024, indicating it is far from isolated:

  • In mid-2024, a Figma user warned that sharing a prototype link could inadvertently expose all pages of a file to the viewer, calling it a massive privacy oversight. The user wrote: “Figma… made a change that bypasses the user’s privacy rights… prototypes you share give access to the entire document… just navigate to the core URL… voila, free access.”[Reddit][Reddit] This user explicitly called out Figma staff, saying “You are a GDPR call away for forcing users to leak their privacy and private data without their knowledge.”[Reddit][Reddit] In a Reddit discussion titled “Figma data leaks.”, others confirmed it “hasn’t been fixed” despite being known for years[Reddit].

  • In another thread, the user describes how an external party gained access to his confidential Figma project because a client accidentally shared a link. The OP laments that Figma’s settings make it too easy to leak data, and pleads: “that’s clearly bypassing user’s privacy rights… I urge stakeholders, including regulatory bodies and advocacy groups, to publicize this matter, investigate these practices and consider legal actions… The community deserves a platform that genuinely prioritizes safety over profit.”[Reddit] (This impassioned call to action underscores how betrayed some paying customers felt about Figma’s cavalier approach to data privacy.)

    • Customer complaint (Reddit): “Even now a person won’t notice it until someone starts playing with the prototype link you shared… [It’s] clearly bypassing user’s privacy rights… You are a GDPR call away from forcing users to leak their private data without their knowledge. And I bet there’s no compensation for any of these. I urge stakeholders, including regulatory bodies and advocacy groups, to publicize this matter, investigate these practices and consider legal actions… The community deserves a platform that genuinely prioritizes safety over profit.”[Reddit]

Notably, the Reddit user above mentions “They said previously they had taken steps… but obviously they haven’t”[Reddit] – indicating Figma was aware of the privacy issue and claimed to fix it, but the fix was either ineffective or incomplete. This aligns with what we see in the Pistachio case: Figma’s leadership knew about internal data access concerns (because users had flagged them 6+ months earlier), tried to paper over it without truly closing the loopholes, and got caught again.

Breach or “feature”? Whether one calls these incidents “breaches” or just “abuse of features,” the crux is the same: Figma’s internal systems allowed non-technical employees (sales reps) to view customer information that should have been private. At best, this is a glaring security design failure. At worst, it’s an intentional growth tactic (giving sales insight into customer usage patterns and projects to hit overly aggressive quotas around Figma’s IPO window) that management willfully turned a blind eye to. Neither scenario inspires confidence.

From an investor standpoint, the risk is twofold:

  1. Reputational/operational risk if enterprise customers lose trust and churn away (no CIO wants a SaaS vendor whose reps peek at their IP), and

  2. Regulatory risk if Figma is later forced to disclose these incidents or gets investigated/fined for not disclosing them. The SEC has recently charged companies for “misleading cybersecurity-related omissions”[Harvard Law].

The bottom-line:
Figma’s silence here could put shareholder value at risk.

Questions that arise: Why didn’t Figma proactively disclose this issue once discovered and reported to the company over 6 months ago? Did the company perform any legal/regulatory analysis of whether the file-access incident was material? If not, that’s a governance failure. If yes, and they concluded “not material,” we would strongly question that judgment. Also, what steps (if any) has Figma taken to prevent future sales snooping? The company’s help center and privacy policy make no mention of this scenario. Are file names and project titles considered “customer personal data” under Figma’s policies? If so, this could also run afoul of data protection laws (as the Redditor noted re: GDPR).

In summary, Figma appears to have concealed a significant security incident to avoid bad press ahead of its IPO and lockup expiration. This lack of transparency is a red flag. If management hid this, what else might they be hiding? We believe investors deserve full disclosure on this incident and any similar cases. (See our Questions for Management section at the end, where we specifically ask Figma to come clean on this matter. We have also emailed Figma’s GC asking the same.)

Select user posts on two X threads regarding the “Pistachio” incident (Oct. 2025):

  • Pistachio CTO (the Customer) Thread: https://x.com/ZackKorman/status/1983943961220690003

  • Figma CEO Dylan Fields Response: https://x.com/zoink/status/1984028464278860252

(IV) Egregious Sales Misconduct: “Dark Patterns” and High-Pressure Tactics

Figma’s problems aren’t limited to technical breaches – they extend to the very way the company makes its money. Our investigation found a widespread pattern of sales misconduct and customer abuse. It appears Figma’s push for growth at all costs has fostered a “win dirty” culture in its sales organization, leading to deceptive billing practices and harassment of customers. These claims are backed by numerous firsthand accounts on customer forums and social media from Figma’s paying clients (many posted in 2025 before and after Figma’s IPO). The sheer volume and consistency of complaints suggest the issues are systemic, not just a few bad actors.

Key abuses reported by customers include:

  1. Fraudulently contacting unrelated departments to force upgrades: Multiple Figma admins recounted how their account managers, frustrated at being rebuffed by the usual point-of-contact, would go around them and reach out to higher-ups or other teams. In one egregious case, after an admin at a multinational firm declined to move to Figma’s expensive Organization plan, the Figma rep directly contacted the company’s finance department and claimed the team was “migrating to the Org plan,” effectively tricking finance into thinking an upgrade was already decided and approved[Reddit]. This caused internal confusion (“tech leaders, other admins… asking me what the rep was talking about”[Reddit]) and put inappropriate pressure on the original admin. The admin complained to Figma, asking that the rep be removed for “shady stuff.” Figma’s response? “Of course Figma didn’t do anything, and the rep is trying to contact other people inside our teams to sell the Org license.”[Reddit]  Essentially condoning the rep’s behavior. This is highly unethical sales conduct, bordering on fraud (impersonating or falsely representing a client’s intentions).

    • Customer testimonial (Reddit): “Next thing I know, the rep goes and contacts our finance dept and tells them we’re migrating to the Org plan. You can imagine the stir… Finance, tech leaders, other admins, all asking me if I decided by myself… a real mess. I told Figma… asked them to remove the rep, since we have no interest to work with someone that does shady stuff. Of course Figma didn’t do anything, and the rep is trying to contact other people inside our teams to try and sell the Org license.”[Reddit][Reddit]

  2. High-pressure meeting bait-and-switch: Figma reps have been reported to set up calls under false pretenses – e.g., offering help with a billing issue or a product demo – only to turn it into a surprise sales pitch. One small-business user shared: “Our account rep wasted my time under the guise of helping with an issue… then immediately launched into an upsell pitch for the Organization plan.”[Reddit][Reddit] The user felt “very icky” about the call and said the rep even asked to speak with other team members “who she thinks would benefit from the other plan”[Reddit]. This kind of bait-and-switch tactic erodes trust and is reminiscent of the worst “used-car salesman” stereotypes.

  3. “Dark pattern” auto-billing of seats: Perhaps the most anger-inducing issue for customers has been Figma’s seat management system, which many describe as a “dark UX pattern” by design[Reddit]. Historically, if any user in your team requested edit access on a file (even mistakenly), Figma would automatically upgrade them to a paid Editor seat – instantly charging the account for an extra seat without any admin approval or even notification until a “true-up” bill would be sent weeks or months later. The admin only discovers the charge later on the invoice, often after accumulating months of fees. One user explained: “Any editor can just press ‘accept’ when another user requests edit rights and they are instantly upgraded to a full editor seat, without letting you or an admin know… You only notice after you get the bill.”[Reddit] Another concurred: “I’m convinced they do it this way on purpose to bleed you out for more paid seats.”[Reddit] This is classic “sneak into basket” behavior – a known deceptive practice where a system opts you into paying for something unless you proactively opt out (which Figma made impossible, since the upgrade was automatic).

    • None of this is new: Figma’s billing has long been engineered so that what looks like a harmless viewer can silently morph into a paid editor seat—with the bill showing up later. Prior to 2025, numerous admins reported that view‑only users could self‑upgrade to paid editor simply by taking an “upgrade action,” without any admin approval or notification—leading to surprise seat creep and surprise charges. (Reddit)

    • After public backlash, Figma changed the workflow in March 2025 and now touts admin approval. But the default is not what it seems: the Help Center says the new default is “Manually approve, unless seat is available.” If you’ve pre‑purchased seats, users can still be auto‑assigned into them—no approval click required. In short: the “fix” still contains a loophole that converts usage into billable seats by default. (help.figma.com)

    • Figma’s “fixes” may be inadequate. Even in environments explicitly set to “always needs admin approval,” customers have reported non‑admin users seeing approval prompts and being able to approve upgrades themselves—an alarming control failure that undermines the claimed guardrails. Separate threads explain that no email alert goes out when a seat is auto‑claimed from available inventory, leaving admins to discover the growth only when they audit settings—or when the invoice hits. (Reddit)

    • Shockingly, as of last month: Figma still defends the practice as evidenced by a “best answer” on Figma’s hosted customer forum. Figma’s support employee explains retroactive, prorated seat charges using a failed “restaurant” analogy. The reply frames post-usage invoicing as normal while omitting the crucial steps that at a restaurant customers are brought a menu and then asked what they would like to order. This is very basic customer consent.

    Why this matters: Whether by design or “accident,” this funnel quietly increases paid seats and elevates expansion metrics. The behavior pre‑2025 looked like a textbook dark pattern; the 2025 “fix” keeps a silent auto‑assignment path open if “available” seats exist. In both variants, revenue expansion happens first, transparency second.

  4. Difficult seat cancellation & phantom “unused” seats: Compounding the above, Figma made it extremely hard to remove or downgrade seats. Customers on annual plans cannot remove a user mid-term; you have to remember to do it in a narrow window before auto-renewal, or you’ll be charged for the entirety of the next year[Reddit]. Even converting an Editor seat to a cheaper “dev” seat didn’t truly downgrade – Figma would keep the full seat active (but “unused”) and bill you for both unless you contacted support to eliminate the old seat[Reddit]. These practices are so beyond the norm that seasoned admins likened Figma to the worst of legacy software vendors. “I have never seen any company that doesn’t allow you to cancel an automatic renewal – congrats, Figma,” one wrote, sarcastically[Reddit]. Another commented: “Seats are a big mess. Clearly it’s by intention… This is the s**t Adobe is hated for.”[Reddit][Reddit] Ironically, Figma – once seen as the fresh, user-friendly upstart alternative to Adobe – has embraced the very dark patterns that made Adobe reviled.

  5. Misleading scare tactics: Users also reported that Figma reps attempted to scare them into upgrades using dubious claims. For example, multiple customers said their rep insisted that staying on the lower-tier “Professional” plan was a security risk, claiming “your current plan isn’t secure, you should be on Organization for security”[Reddit]. There is little technical basis for this; it appears to be a canned talking point to create FUD (fear, uncertainty, doubt) and push a more expensive tier. Customers saw through it (“pretty poor form”[Reddit]) especially when they heard the exact same line from different reps – “It’s like a bingo card in these comments at this point,” the original poster observed after hearing others got the same spiel[Reddit].

  6. Billed twice for the same seat: On Figma’s community forum and Reddit, many freelancers and agencies have complained that Figma “charges me for every user who accesses my files, even if they’re already paid users”[Medium]. A frustrated agency owner described the situation plainly:

    • “I own an agency, and we have freelancers that already pay for their own license, but then I need to pay for an additional license for them when they’re on our project… We have clients that we collaborate with, and we either need to pay for them to have a seat on our account or they have to pay for us to have a seat on their account despite us already having seats of our own. I mean, it’s kind of genius that they’ve found a way to bill twice for the same seat, but it has really driven me to the point of trying to find alternatives.”[Reddit]

    This “bill twice for the same seat” policy has understandably angered customers. Some have even questioned its legality under consumer protection rules. In the same Reddit thread, one user wrote that Figma “ha[s] to be breaking FTC rules by not even alerting people that by simply sharing a file with full edit access, you are going to be charged for a ‘seat’ for each person. It is absurd… not even just a dark pattern, it is full-blown intentional obfuscation.”[Reddit] Another commenter called it “the scammiest thing about Figma so far,” saying “they’ve found a way to bill twice for the same seat, which is an insane business model.”[Reddit] These candid reactions show the level of frustration: some users have floated the idea of a class-action lawsuit to stop the practice[Reddit].

    From a legal standpoint, Figma’s approach likely toes the line of what is disclosed in the user agreement. The criticism is that admins often weren’t clearly warned in-app that inviting an existing Figma user with edit access would auto-upgrade (and bill) a new seat[Reddit]. Lack of upfront transparency could invite regulatory scrutiny (e.g. claims of unfair billing practices). So far, there’s no public record of an actual legal challenge, but the uproar pushed Figma to respond through product changes. The Connected Projects feature is essentially Figma self-correcting this issue before it further threatens customer goodwill, results in legal issues, or attracts regulators.

  7. Surprise “True‑Up” Invoices / Revenue by Ambush: On Organization/Enterprise, Figma bills via quarterly “true‑ups” for seat changes between renewals. Figma’s own docs confirm that any seats approved between March 11 and your next renewal roll into your next true‑up / quarterly invoice. There’s a two‑week review window before Figma issues that invoice, but if admins miss it—or don’t know to look—the bill lands anyway (help.figma.com).

    Real‑world complaints are consistent and recent:

    • May 1, 2025 (Q1 true‑up period): customers can’t reconcile “New charges since last invoice” even though the true‑up is owed—opaque accruals that appear only at true‑up. (forum.figma.com)

    • Historic and ongoing: admins say “quarterly true‑up needs to go away,” calling it ill‑suited for larger orgs; others report surprise charges and describe the system as “low‑key scammy” with dark patterns—forcing them to calendar reminders before invoices roll. (Reddit)

      • Figma Customer: “I ended up with over $1000 dollars in charges on a $12/month plan. I complained, they were willing to refund ONE month at $150. Then they double-billed me for $150 3 days apart. I am so mad. I trusted these people.” (Reddit)

    • Oct 10, 2025 (post‑Q3 close): invoice re‑issue requests and billing churn appear on Figma’s forum—another cluster right after quarter‑end. (forum.figma.com)

    Figma says the true‑up model provides “flexibility”—upgrades take effect immediately, and the bill comes later. That’s exactly the problem: the cash registers ring first, and the human review happens (maybe) inside a short window before the quarterly invoice. The burden of vigilance is on customers; the benefit of ambiguity flows to Figma’s revenue line. (forum.figma.com)

    Pattern to investors: True‑ups + auto‑assignment (if seats are “available”) = predictable seat creep and quarterly revenue lifts. Clusters of complaints line up around Q1 (Apr–May), Q2 (late Jun/early Jul), and Q3 (early Oct) 2025—precisely when true‑ups and renewals hit and, not coincidentally, during the IPO window. (forum.figma.com)

Collectively, these reports paint a picture of a company that is growth-obsessed to the point of abusing its users. The consistency across independent accounts is striking. On Reddit’s Figma discussion forum alone, we found dozens of firsthand posts in late 2025 detailing these issues, with titles like “Is this typical of your Figma account rep?” and “Dark patterns with everything involving seats”. We found the same on X and even Figma’s own community forums.

The consensus among customers/power users/admins:
Yes, it’s typical. Figma’s sales behavior is awful.

Additional illustrative quotes from paying customers:

  • “I blocked the rep that was contacting me because it was constant. Same issue.” (regarding relentless pressure to upgrade)[Reddit]

  • “They’re reusing the same (probably false) talking points… My rep said it’s unusual for an org like ours to be on a Professional plan… (which I suspect is totally bogus).”[Reddit]

  • “We share the same Figma account between countries… Figma rep said, ‘Figma doesn’t have a company your size using the professional plan.’… Next I know, the rep contacts our finance dept… (Figma did nothing when we complained.)”[Reddit][Reddit]

  • “Figma’s seat management is a really dark UX pattern… any user requests edit and gets upgraded, no admin knows… It does seem like a dark pattern driven by business goals rather than anything user-centered.”[Reddit][Reddit]

  • “They suck. The reps are useless. All they want to do is milk your company for money. The billing process is a giant pile of a and they purposefully make it obtuse so they can zap you for huge bills at ‘true up.’”[Reddit]

  • “It SUCKS that they’re the de facto tool. It’s going to be even worse now that they’re public and there’s higher pressure to sell… whatever tactics they use.” [Reddit]

It’s rare to see such a volume of negative feedback concentrated on a specific aspect (sales/billing) of a modern SaaS company. In our experience, this typically indicates the behavior is driven from the top – i.e., Figma’s management set aggressive targets and incentives that effectively encourage these tactics. It’s noteworthy that some comments speculate “now they’re public, pressure is higher”[Reddit], implying the environment worsened as Figma prepared for IPO (to pump metrics) and as a public company (to meet quarterly numbers). If true, investors should be alarmed: these short-term tactics burn customer goodwill and can lead to higher churn or backlash. In an industry as competitive as design software (with emerging alternatives like Penpot or even a revived Adobe XD—just look at XD’s iOS App Store reviews vs. Figma), Figma may be sowing the seeds of its own customer exodus.

Recent “fixes” – too late? Only after significant outcry did Figma finally make changes. In its March 2025 billing revamp (discussed in next section), Figma claims it “moved away from user-driven upgrades and given admins upfront approval over seat upgrades by default”[Figma Forum]. In other words, they acknowledge the old system was bad (“user-driven upgrades” = users auto-adding paid seats) and now admins have to approve seats. That’s a welcome change, but it raises questions: Why was such an obviously user-hostile system in place to begin with? (Hint: It was great for revenue, until people caught on.) And how many customers were quietly overcharged before this was fixed? Figma hasn’t apologized or refunded anyone as far as we can tell. The announcement of the fix was likely timed to prevent a backlash at IPO time rather than out of genuine empathy and users continue to report the same issues even within the last month.

From an investor perspective, the key point is that Figma’s growth has come, in part, through unsustainable means: squeezing customers with sneaky billing and bullying tactics. These behaviors can goose short-term expansion metrics (seats, ARPU, net retention), but they are not sustainable. Eventually customers rebel – as seen on Reddit and elsewhere – and some will leave. It’s notable that a number of users in those threads explicitly mention evaluating alternatives (“As soon as Penpot gets things we’re missing, it’s goodbye Figma”[Reddit], “Many are looking for other options,” etc.). If Figma’s NDR or growth were juiced by such tactics (which we believe they were), those numbers could decay quickly once the tactics are removed and frustrated customers continue to move elsewhere.

In summary, we see Figma’s sales conduct as a major risk factor. It indicates potential internal control issues (management either condoned unethical practices or negligently unaware – either is bad). It jeopardizes the long-term customer relationships that underpin any SaaS valuation. And it could draw regulatory scrutiny; deceptive billing and sales practices have, in other industries, led to FTC investigations, EU enforcement actions, or consumer protection lawsuits. Figma’s behavior might warrant such attention if it hasn’t already drawn it.

Investors should demand answers from Figma: How will you clean up your sales organization? What are the churn implications of these dark patterns? Do you risk a class action from customers over unauthorized charges? (We pose some of these in “Questions for Management”.) If the answer is dismissive or vague, that’s a big red flag.

Select user posts from Reddit below (use arrows to scroll):

(V) Pre-IPO Financial Maneuvers: Promotions, Price Hikes, and Smoke & Mirrors

Figma’s headline financial metrics – like its Net Dollar Retention (NDR) of 134/132% and robust revenue growth – have been a cornerstone of the bull case. However, our analysis indicates these figures were artificially inflated by a series of tactical maneuvers in the run-up to the IPO. By offering time-limited freebies and then converting them to paid, and by implementing across-the-board price increases right before going public, Figma created a one-time surge in expansion revenue that flatters its apparent customer retention and growth.

Let’s break down the key levers Figma pulled:

  1. FigJam free, then paid: Figma launched FigJam (a collaborative whiteboard tool) in 2021 and made it free for at least its first year to drive adoption[Blog]. Starting in 2022, Figma began charging for FigJam for teams that wanted unlimited use, at $3–5 per user/month depending on plan[Blog]. This means many customers who were using FigJam for free in 2021 (and weren’t contributing to revenue) suddenly became paying customers for FigJam in 2022—boosting 2022’s ARR, NDR, and revenue growth around the 2022 Adobe deal negotiations. That conversion would register as “expansion” (increasing NDR) even though it was largely a result of a policy change (ending a free trial) rather than organic growth. After the Adobe deals termination in 2023, Figma once again used a freebie to boost FigJam adoption. This time, Figma ran a one-time Jamboard migration promo that gave up to 12 months of FigJam Professional free for teams that imported a Jamboard file and started an annual FigJam Pro subscription. It ended January 31, 2024 when unpaid FigJam users became paying customers. Thus, by 2024, FigJam had become a meaningful add-on offering and had plenty of users who had never paid for it—boosting 2024’s ARR, NDR, and revenue growth ahead of its IPO year. Then, right before the IPO, Figma decided to bundle FigJam into paid plans (no more separate fee) but correspondingly raised the core pricing (we’ll get to that later). The net effect: FigJam’s introduction, promotions, and monetization timeline gave Figma’s financials a one-time lift in 2022 and again in 2024. Then its later bundling helped justify a massive price hike in 2025 and establish Figma’s high “80% of customers use two products” metric that is really just an outcome of Figma’s new plans.

  2. “Dev Mode” giveaway: In mid-2023, Figma announced Dev Mode, a set of features for developers to inspect designs and extract code. They introduced a cheaper “Dev Seat” for developers, priced lower than a full editor seat[Blog]. Initially, Figma allowed many customers to try Dev Mode for free or included it in existing editor seats (essentially a freemium approach to seed usage)[Blog][Blog]. By early 2024, they started monetizing it: customers could buy Dev seats separately, and later Figma would include Dev seats in the Professional (SMB) tier as well[Blog][Blog]. In 2025, with the pricing overhaul, Figma bundled Dev Mode access into the new seat structure – meaning many devs who had been using it for free now needed a paid Dev seat (at ~$12–15/month on annual vs monthly)[Blog][Blog]. This transition from free beta to paid feature likely drove an expansion wave: companies that gave Dev Mode a try in 2023 faced bills in 2024–25—driving IPO window revenue growth, NDR expansion, and ARR.

  3. Figma Slides free trial: Figma’s foray into presentations, Figma Slides, launched in 2024. Like FigJam, Figma Slides was offered free for the rest of 2024[Blog], with plans to charge in 2025 ($3–5 per user, matching FigJam’s pricing)[Blog][Blog]. So during 2024, customers may have started using Slides at no cost (increasing their dependence on the platform). Then in Q1 2025, Figma signaled that Slides would become a paid add-on going forward. However, instead of charging separately and making the pricing page more complex, Figma again chose to bundle – as part of the March 2025 pricing change, Slides was included “for free” in all seat types[Figma Forum][Figma Forum] (Collab, Dev, Full seats all include Slides by default[Blog]). Of course, nothing is truly free: this bundling was part of the rationale to raise the core seat prices significantly and further supports the idea that Figma’s multi-product adoption metrics are not particularly insightful.

  4. March 2025 price hikes (“Pricing 3.0”): This is the big one. Effective March 11, 2025, Figma rolled out a new pricing model that did a few things at once:

    • Consolidated seat types: They went from a mishmash of Editor/Viewer, plus separate add-on fees for FigJam/Slides, to three main seat tiers – Full, Dev, and Collab – each with defined access levels[Blog].

    • Included more in each seat: As noted, every paid seat now comes with FigJam and Slides capabilities (no separate add-on fee)[Figma Forum][Figma Forum].

      • Additionally, Figma’s 2Q2025 quarterly earnings press release prominently reported multi-product adoption as a triumph. In the report and earnings call, there was no mention that Figma’s new pricing model creates high multi-product adoption by default.

    • Raised prices significantly: The cost of a Full (editor) seat jumped ~20–35% (varies by plan; e.g. Pro plan from $15 to $20, Org from $45 to $55 monthly per editor, etc.)[Blog]. Collab seats (for non-designers) and Dev seats were introduced at new price points (Dev ~$12/mo annual). In effect, most existing customers saw a double-digit percent increase in their Figma bill once their renewal hit after Mar ‘25[Blog].

    • For example, the Professional (Team) plan editor seat went from ~$12/seat/month (annual) to $16 (annual) – a 33% hike[Blog][Blog]. Organization plan editors went from $50 to $60/user/month (approx, based on annual pricing) – a 20% hike[Blog]. Enterprise saw similar ~20% up. These are substantial increases, especially given Figma had already monetized new products from 2022–2024. The company messaged it as adding more value (free FigJam/Slides included)[Figma Forum][Figma Forum], but the reality is this was a monetary up-sell across the entire customer base.

    • The consequence of all the above: Figma’s Net Dollar Retention was — and continues to be — goosed by one-off changes rather than purely by organic growth or adoption. If a customer spent $100k on Figma in 2024, and in 2025 Figma jacked up prices 25% while the customer’s organic growth added 10% seat volume, that customer might now spend ~$138k – appearing as 138% NDR (great!) even if they only expanded their team usage by ~10%. It’s basically front-loading ~10-years of inflation in to the IPO-window, not sustainable expansion.  

Figma is familiar with short-term boosts: There is evidence that Figma’s growth metrics surged before the Adobe acquisition was announced, only to dip during the prolonged merger review – a pattern that we believe is repeating around Figma’s IPO and early earnings results. Notably, Figma’s net dollar retention rate (NDR) – a key measure of revenue expansion within the existing customer base – spiked to an unusually high ~150% around 2022 (at the time Adobe’s $20 billion bid was made) and then plunged to roughly the mid-120s by the end of 2023[wing.vc]. In the same interval, Figma’s annual revenue growth decelerated sharply, from ~100% year-over-year during 2022 to only about 40% in 2023[wing.vc]. This post-acquisition-announcement slowdown suggests that Figma may have pulled forward a lot of expansion and upsells in 2022, boosting short-term results in anticipation of (or to justify) the Adobe deal, after which growth normalized at a lower level. Indeed, by late 2023 Figma’s fundamentals no longer looked as lofty as when Adobe first struck the deal – net retention fell, growth cooled, and the tech market’s multiples had compressed – making that rich $20 billion price appear increasingly hard to justify[wing.vc][wing.vc]. Officially, the merger was abandoned due to “no clear path” for regulatory approval[Reuters], but this steep drop in Figma’s momentum (clearly visible in its key financial metrics) during the 15-month antitrust limbo was surely a contributing factor in sapping enthusiasm for the transaction. See NDR table below regarding Figma’s steep 37% decline in NDR during the “pending” period of the Adobe deal (Figma’s NDR bottomed right in December 2023 when the merger was terminated).

Fast-forward to 2024–2025, and Figma seems to be employing similar tactics to “juice” its metrics in the run-up to its IPO. Some of these tactics are perfectly legitimate one-time boosts (e.g., price hikes) and we’re simply calling attention to the fact they will result in increasingly hard comps in the future. Figma’s short-termism regarding its egregious sales tactics (described earlier) is both more concerning for long-term investors and much harder to measure.

Let’s quantify the impact on NDR:

  • Another Analyst already did so we’ll share that: Figma reported 134% NDR for FY2024, and 132% as of Q1 2025[SEC] – world-class numbers. But fine print reveals this is calculated only on customers >$10k ARR and who remained >$10k ARR[Blog][Blog]. This biases the metric upward by excluding churn and downsells from smaller clients, as well as any big client that dropped below $10k. According to an independent analysis, Figma’s >$10k cohort (about 11k customers, just 2.5% of total count) contributed 132% NDR and made up 64% of ARR[Blog][Blog]. The remaining ~98% of customers presumably had far lower retention (some likely <100%). When the analyst modeled a plausible scenario for the whole base, they estimated blended NDR around 115–120%[9]. So immediately, the real retention is perhaps ~15 percentage points lower than the headline suggests, just by considering SMB churn.

    • Note: We notified General Counsel Brendan Mulligan of the apparent inconsistency in Figma’s Net Dollar Retention methodology the analyst above adjusted for. Figma’s S-1/A (May 23, 2025) defined NDR using a “dual-gate” >$10k ARR screen in both periods, which would exclude churned or downsized customers. The subsequent final S-1 and June 30, 2025 10-Q adopts a more standard cohort approach that includes expansion, contraction, and churn. Given Figma did not restate disclosed NRR figures of 134% (12/31/24) and 132% (3/31/25) from the May 23, 2025 S-1/A to its final version, we requested three clarifications (noting that clear disclosure of KPI methodology changes is required under Reg S-K Item 303(b)(3) and SEC Release No. 33-10751):

      • Whether the 12/31/24 and 3/31/25 NDR were calculated on a prior-period cohort including churn/shrinkage, or on a survivors-only basis.

      • If survivors-only, what the recalculated NDR/NRR would be under the 10-Q cohort method.

      • Whether any variance was deemed “immaterial,” and the quantitative analysis supporting that conclusion.

  • Ignoring NDR calculation methodologies, we still see considerable downside: As of 2Q2025, Figma reported its NDR at 129%—seemingly healthy. Importantly: 129% NDR is not a steady-state, quality metric – it’s been juiced. Out future steady-state NDR forecast makes the following adjustments:

    • STARTING NDR: 129% (As reported in Figma’s 2Q25 Form 10-Q)

    • LESS: Price Hike: 7.5% (2Q25 Earnings Call, Figma CFO: The one-time price hike contributed mid-to-high single digit %)

    • LESS: Dev Mode: 2.5% (EAQ Figma Financial Model)

    • LESS: Connected Projects: 1.0% (EAQ Figma Financial Model)

    • LESS: Sales Misconduct: 5.0% (EAQ Figma Financial Model)

    • LESS: IPO Window Promos: 1.0% (EAQ Figma Financial Model)

    • LESS: Size Penalty (Scale): 3.0% (EAQ Figma Financial Model)

    • ADJUSTED NDR: 109% (Author’s future “steady-state” forecast)

We expect it will take until the second half of 2026 for Figma’s NDR to reach our forecast — with downside should Figma face more severe penalties for their cybersecurity issues and egregious sales misconduct.

Quarterly NDR is as reported for the quarter’s ending March 31, 2023 to June 30, 2025. Future quarters use the author’s forecast.
Sources: Figma’s Form S-1 and Figma’s Form 10-Q (2Q2025)

(VI) Web Architecture Risks at Figma

Figma’s web‑first architecture delivers real‑time collaboration, but it also bakes in ceilings on performance, offline reliability, color management, openness of the file format, and “design‑to‑code” fidelity. Those ceilings matter more as files, teams, and—importantly—automation ambitions scale.

How Figma actually works:

  • Rendering and core engine. Figma draws the canvas with a custom GPU renderer built on WebGL; the high‑performance editor core is written in C++ and bridged to a TypeScript/React UI. The early stack used asm.js and later WebAssembly to cut app load time by ~3×. This bypasses the browser’s DOM/SVG renderers to ensure cross‑browser fidelity.

  • Real‑time “multiplayer” sync. Clients speak to a document process over WebSockets; the system keeps a local copy, sends deltas, tolerates disconnections, and reapplies offline edits when you reconnect. Figma intentionally avoided OTs in favor of a simpler custom scheme; the company later moved critical server hot paths from TypeScript to Rust for latency and parallelism.

  • Plugins and sandboxing. Third‑party code runs in a VM sandbox (QuickJS compiled to WebAssembly) after Figma deprecated the Realms shim due to disclosed escape vulnerabilities in 2019. Plugins can read/modify the open file and call any external server; orgs can whitelist plugins. This is powerful, but it is also a data‑exfiltration vector if governance is weak.

  • File format and API. The on‑disk “Save local copy…” produces a .fig snapshot that bundles schema and data; internally Figma serializes with a compact binary format (“kiwi”). The public surface for files is the REST API, which is rate‑limited and costed per endpoint. Heavy access will hit 429s and timeouts.

Product ceilings that show up at scale:

Figma failed the Moby Dick test, ran out of memory after freezing for 55-seconds.
Link: https://bjango.com/articles/designtoolmemory/

  • Memory and large‑file performance

    • Browser/Electron constraints show up under heavy documents. Independent testing finds Figma’s per‑document memory footprint materially higher than peers and prone to freeze or exhaust memory under text‑heavy stress tests; the author attributes part of this to per‑tab limits. Even if you accept that analysis cautiously, the direction of effect is clear. Bjango

      • In testing Figma’s memory capacity as of late 2023 (vs. competitors), the researcher wrote: “The idea is simple — create a text box and paste the entire contents of Moby Dick into it. Then, duplicate the text box and test memory usage with 5, 10, and 15 copies. Moby Dick is around 1.3 MB. It’s a hefty chunk of text, but by no means huge, especially for modern computers. Graph showing how much memory is used with multiple copies of Moby Dick pasted into a document. Figma and Sketch not shown. Illustrator, Affinity Designer, and Photoshop all about the same. The graph above looks a little empty, because Sketch and Figma both had issues with Moby Dick. Sketch froze not long after pasting the text. Figma froze for 55 seconds after pasting, then ran out of memory. Testing both apps again with a 200 KB text file gave similar results. The other apps handled 15 copies of the full Moby Dick text. I didn’t test beyond that point. Note that the memory usage for each additional text box seems minimal, which is what you’d expect, given it’s just 1.3 MB of text.”

    • Practitioner guidance around “memory usage at 70–90%” and file sharding is widespread, which is consistent with the above. It is anecdotal, but common. Reddit+1

    • Risk: Teams with massive libraries, many variants, or image‑heavy boards will see nonlinear slowdowns and operational friction as memory headroom collapses. This is a structural effect of the runtime, not a simple bug. madebyevan.com

  • Offline is partial, not primary

    • Figma’s client keeps working offline and will reapply edits after reconnection, but the model is cloud‑first: initial loads, file discovery, and some flows depend on service availability. That fits their own description of syncing and reconnect behavior. madebyevan.com

    • Third‑party write‑ups reinforce the practical constraint: to work offline smoothly you typically must have authenticated and loaded the file/pages before the connection drops. Treat those as operational workarounds, not guarantees. Supercharge Design

    • Risk: Travel, VDI, or high‑latency environments still experience brittle edges compared with native, fully local tools.

  • Color management and print workflows remain limited

    • Figma’s canvas is effectively sRGB‑centric and not fully color‑managed for wide‑gamut workflows; CMYK export isn’t native. Print‑oriented teams rely on plugins or downstream conversion. This is a long‑standing limitation noted by color experts and plugin vendors. Bjango+1

    • PDF import isn’t natively supported; teams lean on community plugins to pull PDFs in as vectors or images. That is friction for brand and print back‑catalogs. anything.to.design

    • Risk: Brand, marketing, and packaging teams face extra steps and fidelity risks when bridging screen and print pipelines.

  • “Design‑to‑code” is still guidance, not ground truth

    • Figma’s Dev Mode exposes measurements and generated snippets, but Figma itself steers serious teams toward Code Connect, which replaces auto‑generated code with snippets drawn from your real component library. That is an admission that raw codegen isn’t trustworthy in production without mapping to your system. GitHub+1

    • Developer sentiment reflects this: useful for inspection, unreliable for copy‑paste implementation at scale. That’s qualitative, but consistent. Reddit

    • Risk: Handoff gains plateau unless you invest in Code Connect integration and governance; simple copy‑paste code promises remain aspirational.

  • Accessibility of prototypes is improving but uneven

    • Figma added a prototype screen‑reader path (beta) so assistive tech can read prototype content, but this is relatively new and not equivalent to shipping accessible HTML. Early reports and how‑to guides confirm capability and limitations. Medium+1

    • Risk: Teams that conflate accessible prototypes with accessible products risk false confidence without developer‑side a11y work.

  • Binary format and rate‑limited APIs hinder open exit

    • The .fig snapshot is a proprietary container (zip with bundled schema) and the live system serializes to an internal binary (“kiwi”). The API is the sanctioned interface; it is rate‑limited and time‑boxed on heavy endpoints. Migration and large‑scale synchronization require careful batching and backoff strategies. madebyevan.com+1

    • Risk: At enterprise scale, “take your data and leave” is not a single click. It is an engineering project gated by quotas.

  • Desktop ≠ native

    • The desktop apps are Electron shells around the web engine. That means Chromium’s process and memory behavior applies on desktop too. Expect parity with the browser experience, not native OS performance semantics. Wikipedia

    • Risk: You do not escape browser ceilings by “going desktop.”

  • Service reliability remains a dependency

  • Figma acknowledges incidents tied to upstream providers; recent public updates flagged AWS‑related degradation. Third‑party status aggregators also show recent disruptions, including for new AI features. The point isn’t unusual downtime; it’s that single‑vendor cloud dependency is intrinsic to the product. X (formerly Twitter)+1

  • Risk: When Figma or its cloud provider(s) has an incident, design, review, and handoff can stall org‑wide.

Recent AWS outage in October 2025 caused Figma outage:

  • New vectors from AI features

    • MCP server and “Make.” Figma is pushing an AI‑augmented flow where models access design context and even the code behind AI‑generated app prototypes (“Figma Make”), including remote IDE integrations. This expands capability, but also creates new surfaces to secure and govern. These updates are very recent and still evolving. The Verge+1

    • Third‑party ecosystems matter. A recent high‑severity RCE in a third‑party MCP integration (not Figma’s server) illustrates how quickly AI‑adjacent tooling can become a security liability if unvetted. TechRadar

    • Risk: AI‑driven productivity becomes AI‑driven blast radius unless enterprises lock down integrations and audit scopes.

Bottom line: Figma’s engineering is world‑class, but its web‑first design sets the boundaries: GPU canvas in a browser/Electron, custom CRDT‑style sync, a binary scene format, and plugin/AI ecosystems that trade control for reach. At small scale this is a feature. At enterprise scale it is also a risk register: memory ceilings, partial offline, print/color gaps, codegen that requires mapping, proprietary snapshots, and cloud dependency. None of this is controversial if you read Figma’s own engineering notes. It is just physics.

(VII) Implications of Figma’s Low Float and Extended Lock-Ups on Stock Performance

(1) Insider/VC Ownership and Float Dynamics

Figma’s shareholder base is dominated by insiders and venture capital (VC) backers. As of Q3 2025, insiders (founders, executives, employees) held about 50.5% of the shares, and institutional investors (including VCs) held roughly 50.2%[Trading News]. This left only a tiny public float – at IPO in July 2025 Figma floated just 36.9 million shares (~6% of the company)[SEC FI]. Such a small float created artificial scarcity, meaning very few shares were available for trading initially. The immediate result was a frenzied IPO pop: priced at $33, Figma opened around $85 and closed its first day at $115.50 (a 250% jump from the IPO price)[SEC FI][SEC FI]. This explosive debut repriced the remaining 94% of shares (still held by insiders/VCs) at a much higher valuation without those holders selling any stock. In other words, a low-float IPO can benefit existing owners on paper by quickly boosting the value of their locked shares[SEC FI].

Such large insider and VC ownership implies that most shares are initially locked up, which drastically limits supply in the market. This often leads to high volatility and overshooting prices in early trading[Blog][Investing]. With Figma, the combination of huge demand ( reportedly 30× oversubscribed book) and scarce float created a classic supply-demand imbalance that sent the stock vertical[SEC FI]. In essence, heavy insider/VC ownership means public investors are trading only a sliver of total shares, so any buying or selling has an outsized impact on price. This scenario can keep valuations lofty in the short term, since insiders/VCs (who might be eager sellers) aren’t yet free to sell. It’s a double-edged sword: scarcity can drive big rallies, but if fundamentals don’t justify the valuation, a sharp correction can follow once more shares enter the float.

(2) Float % and Lock-Ups – Figma vs. Other Tech IPOs

Figma’s ~6% IPO float is exceptionally low, even among recent tech IPOs that have trended toward smaller floats. For comparison:

  • Instacart (Maplebear) – floated < 8% of shares in its 2023 IPO[6], resulting in a strong debut (+12% day-one). Executives explicitly chose a low float to provide liquidity mainly for employees, not to raise a ton of new capital[Investing]. This small float strategy created a supply/demand imbalance at first, similar to Figma.

  • Arm Holdings – floated ~9.3% of shares in 2023[Investing] (SoftBank retained the rest), and its stock jumped about +25% above IPO price on day one[8]. Arm’s tiny float (for a ~$50B company) made it prone to volatility – indeed, its shares pulled back over the next couple days[Investing].

  • VinFast (VFS) – an extreme case: only 0.3% of shares floated after its 2023 SPAC listing[Investing]. The result was a 255% surge shortly after debut (akin to a meme-stock frenzy)[8]. However, such moves often reverse – VinFast’s stock later collapsed to roughly half its peak value once initial euphoria passed[Investing].

These examples show Figma is not alone in using a “low float” IPO strategy. In fact, average IPO floats have been shrinking – in 2021 and 2022 the average float was ~18–19%, the lowest in decades according to IPO researcher Jay Ritter[Investing]. Figma’s ~6% float was far below that average, even among large tech listings. Low floats often produce big first-day pops and positive headlines (e.g. “stock doubles on debut”), as seen with Figma (158%+ pop intraday[Reuters]) and others. But a small float does not guarantee lasting gains – it can also “exacerbate losses if the share price drops” later on[Investing]. In essence, low-float IPOs amplify volatility in both directions. Once the initial hype fades, stocks like Figma can correct sharply – Figma indeed went from a high of ~$120 down to ~$50 in just a couple months[Trading News] as reality caught up with the hype.

It’s also worth noting that Figma’s IPO was intentionally structured this way. By selling only a tiny portion at $33, Figma left money on the table (the stock’s immediate surge implied the IPO was underpriced)[SEC FI][SEC FI]. Some criticized this as a $2–3B “gift” to IPO buyers, but others argue it was a strategic move – the enormous pop created buzz and “repriced” Figma’s remaining shares at a much higher valuation[SEC FI]. In other words, the VCs and insiders didn’t get all their cash upfront, but they now hold stock valued at ~$50 instead of $33. This strategy – using a small float to engineer a big pop – has been seen in other IPOs to signal confidence and generate momentum in a tepid IPO market[SEC FI]. The key takeaway is that Figma’s float vs lock-up mix was unusually skewed, even compared to similar large tech IPOs, and history shows such cases often have initial outperformance followed by volatile normalization.

(3) Short Interest, Borrowing Costs, and Low Supply

One immediate implication of Figma’s low float is a constraint on short selling. With so few shares freely trading, it’s very difficult for bearish investors to borrow shares to short the stock. Our own trades were constrained by this: we were unable to borrow shares—leaving long puts as the next best exposure. As of this writing virtually zero shares are available to borrow in the securities lending market, and any sporadic availability comes at a hefty borrow fee (recently ~20% annualized on Interactive Brokers)[Blog]. This double-digit borrow rate (which at times exceeded 20%+) reflects intense demand to short Figma combined with limited lendable supply of shares. Such high fees create a significant cost of carry for short sellers – a 20% annual borrow fee can eat away at any eventual profits, and it signals how scarce and coveted borrowable shares are. Figma’s short interest surged rapidly in the months after IPO: by mid-September 2025, short interest jumped to over 10 million shares (up 57% from late August)[Source]. As of the latest data in October, about 11.6 million shares were sold short, which amounts to ~26.6% of the public float being shorted[Source][Source] (over a quarter of all tradeable shares!). This is an enormously high percentage of float – for context, that’s on par with heavily shorted “squeeze” stocks. It underscores that many investors are betting on Figma’s richly valued stock to fall – but they face the hurdle of finding shares to short and paying high borrow fees for an extended period.

Historically, IPOs with tiny floats often see elevated borrow costs and short interest – and sometimes legendary short squeezes. For example, Lyft’s IPO in 2019 had such hard-to-borrow shares that initial borrow fees hit 100%+ annualized[Source]. Beyond Meat (BYND) in 2019 (and again last month!) is another case: with most shares locked up, BYND’s borrow fee averaged 70–90% early on (briefly over 100% for new borrows)[Source]. This made shorting extremely expensive and contributed to BYND’s stock skyrocketing ~8× above its IPO price before eventually crashing. Tilray (TLRY), the poster child of low-float mania, saw borrow fees soar to an insane 700% annualized ahead of its lock-up expiration, as only a tiny float traded while insiders were locked – shorts were effectively paying ~2% per day fee[Source]. These examples show that when 99% of shares are held by owners who can’t or won’t lend, shorting becomes costly or impossible[Source]. In Figma’s case, with ~90+% of shares held by insiders/VCs who likely aren’t lending shares, the short-selling capacity is severely constrained. This can prop up the stock price in the near term, since it limits one source of downward pressure (short sales) and can even lead to short squeezes if remaining float is aggressively bought.

However, the flip side is that high short interest on a small float also means any negative catalysts can trigger sharp drops as well – if some shorts have managed to position, even a small float increase or bit of bad news can send the price tumbling quickly when everyone rushes for exits. So far, though, short sellers in Figma have had modest influence. As one analysis noted in September, short interest was only ~2.5% of float at that time[Source] (float definition then was broader) and “limited pressure” from shorts was present – the real volatility driver was the lock-up expiration risk and lofty valuation, not shorts piling on[Source]. But that dynamic may change as more shares slowly enter the market (see next section) and as fundamental news comes out.

For a short seller, timing is critical in such situations. Entering too early means paying months of double-digit borrow fees while the stock’s float remains tight (which can keep the price higher than fundamentals merit). We’ve seen that short sellers often target the lock-up expiration as a catalyst for a price drop (since a wave of new supply can depress the price)[Source]. But they must survive until then. In Tilray’s case, many shorts actually covered just before the lockup release (to avoid the punitive 700% fees), which ironically caused a pre-lockup rally[Source]. Once the lock-up shares became available and borrow fees finally eased, Tilray’s stock did fall (–45% in the quarter after the lockup) and borrow cost normalized to ~20%[SP Global]. The lesson is that shorting a low-float IPO can be profitable in the long run, but it often involves painful carrying costs and volatility in the interim. In Figma’s case, the current borrow fee ~20%[Source] is lower than those extreme examples, but it’s still substantial – it will erode ~10% of a position (half of 20%) by next summer, for instance. And if any positive news or buying frenzy hits Figma while float is low, shorts could be forced to cover at a loss given the difficulty of maintaining the position. In summary, the scarcity of borrowable shares and high fees suggest that significant downside may not materialize immediately because short sellers are handcuffed in applying selling pressure until float increases and shares become available to borrow.

(4) Lock-Up Expiration Schedule and Delayed Selling Pressure

A crucial factor for Figma is its lock-up expiration calendar – essentially, when and how the currently locked shares (insiders’ and VCs’ holdings) can be sold. Typically, IPO lock-ups last 180 days (6 months), after which insiders/early investors can sell. For Figma, a standard 180-day period would have ended in late January 2026. However, Figma implemented a staggered lock-up plan:

  • Early Release for Employees: On September 5, 2025 (just ~5 weeks post-IPO), 25% of employees’ shares became eligible for sale because Figma’s stock met a performance trigger – it traded >25% above the IPO price for at least 5 consecutive days[Source][Source]. This early unlock was designed as a reward/liquidity for employees after the big stock surge. It added a bit of float (introducing some immediate supply). Indeed, around that time Figma’s stock dipped ~14% as this initial tranche hit the market amid broader growth concerns[Source][Source]. So we saw a taste of selling pressure when even a quarter of employee shares got unlocked.

  • Main IPO Lock-Up Expiry (Standard 180-day): Figma’s IPO prospectus indicated that the bulk of shares would be free to trade at the open of November 7, 2025 (this appears to be an accelerated timeline tied to the earnings schedule)[Source]. In fact, Figma announced that “substantially all” Class A shares under IPO lock-up would be released on Nov 7, 2025 per the original agreements[Source]. This would normally have unleashed a huge wave of stock into the market in November. However – Figma took an extra step to prevent a flood.

  • Extended Lock-Up for Key Holders: On August 30, 2025, Figma arranged an extended lock-up agreement with holders of approximately 54.1% of its Class A shares, restricting them from sale until August 31, 2026[Source]. In other words, over half the company’s shares (likely those held by major VC firms and possibly founders) agreed not to sell for a full year beyond the typical lock-up. This was a deliberate move to “stagger” the supply and avoid a sudden dump of shares in one go[Source]. Essentially, many of the largest pre-IPO investors voluntarily locked themselves up until summer 2026 to signal confidence and support the stock. Meanwhile, any shares not under that extended lock-up became free in Nov 2025 as scheduled. So after Nov 7, 2025, Figma’s float increases, but not by the full amount of insiders’ holdings – a huge chunk remains off-market until mid-2026.

This dual-layer lock-up strategy reflects a broader trend for hot tech IPOs to spread out unlocks and reduce immediate post-IPO selling pressure[Source]. Companies fear the classic pattern of stocks tanking at the 6-month mark when everyone rushes for the exit. By getting key stakeholders to agree to hold longer, Figma aimed to stabilize the stock in the interim[Source]. The trade-off is that the market knows a large supply overhang is still coming, just at a later date.

What does this mean for downside risk? In the near-to-medium term (late 2025 into early 2026), Figma’s float will remain relatively low. Even after November 2025’s lock-up termination, with the extended agreements in place the public float is only around 43.5 million shares out of ~410 million outstanding (≈10.6% float)[Source]. That’s still quite restricted. The biggest potential sellers – the VCs and large insiders – are essentially locked up until summer 2026, meaning they cannot add selling pressure until then. This artificially limits the supply of stock in the market for the next few quarters. With fewer shares available, it may indeed “limit the downside” in the stock for now, as the user suspected. Simply put, who is going to sell in size? Many early investors are contractually unable to until 2026. Those who can sell (employees, smaller holders) have partly done so or may trickle out sales over the winter. Moreover, with short sellers constrained by the factors discussed, there isn’t a huge pool of “synthetic” supply either. All this could mean Figma’s stock stays elevated longer than fundamentals alone would warrant, at least until the lock-up overhang starts lifting.

That said, low float doesn’t guarantee the stock can’t fall – it just changes the dynamics. The stock’s performance will still respond to earnings and sentiment. For instance, Figma dropped from ~$115 to ~$50 in the months after IPO even while most shares were locked, due to concerns about slowing growth and high valuation[Source][Source]. So negative fundamentals can drive downside even in low-float conditions – but possibly not as dramatically as if all holders were free to sell. Any current selling is mostly from new public investors adjusting positions or a trickle from early release shares, rather than massive VC liquidation. This could mean a somewhat grinding downward drift (as valuation moderates) rather than an immediate collapse. The real wave of selling pressure – and thus potentially the full bear case playing out – might indeed arrive only in mid-2026 when that 54% chunk of shares unlocks. At that point, some very large stakeholders (venture funds like Kleiner Perkins, Sequoia, etc., who got in at tiny valuations[Source][Source]) will have the first chance to realize gains. It’s reasonable to expect many will sell at least a portion of their holdings in summer 2026, simply as part of returning capital to investors or rebalancing. The supply shock from tens of millions of shares potentially hitting the market could put significant downward pressure on Figma’s stock – if the market hasn’t already priced that in. Often, savvy investors anticipate lock-up expirations: short interest tends to peak before the event and volume surges around the unlock date, with the stock sometimes sliding in advance[Source]. So by the second half of 2026, if it’s widely expected that “VCs will dump shares,” Figma’s price may weaken ahead of the lock-up expiration as traders position for it. Once the date arrives, if selling is as heavy as expected, the stock could decline further; alternatively, if the event was fully anticipated, the drop might be more muted or short-lived (sometimes stocks paradoxically bounce after a lockup expiration if the worst was already priced in before).

In Figma’s case, the extended lock-up was well-telegraphed, so investors are aware that full float normalization is a long way off (Aug 2026)[Source]. Between now and then, additional unlock events may include: any secondary offerings or block trades (sometimes companies do a secondary sale before the full lockup ends to let certain holders out in an orderly fashion), or insiders gradually selling small amounts (if allowed under some trading plans). Absent those, the big inflection point is indeed Summer 2026. Until that time, Figma’s low float could act as a supporting factor – the stock might not face the “flood of supply” that typically triggers big declines post-IPO.

(5) Outlook: Will Downside Take Longer to Materialize?

  • Given all the above, it appears likely that Figma’s low float and extended lock-ups will delay the full force of selling pressure. In plainer terms, our short thesis may take longer to play out than it would in a stock with a normal float. With so much insider/VC ownership tied up until 2026, the supply of shares available to drive the price down is currently limited. This can keep the stock elevated or range-bound, barring a major deterioration in the company’s performance. It doesn’t mean the stock can’t drift downward – it has already come down from its post-IPO highs on fundamental concerns – but truly pronounced downside moves might require the unlock of new supply (i.e. when big holders can finally sell).

  • Historically, many IPO stocks experience their most significant declines around or after lock-up expiration, when the market is suddenly flooded with shares from insiders cashing out. For Figma, that moment is spaced out – a minor one in late 2025 (for those not in the extension) and the major one in mid-2026 (for the extended 54%). The mid-2026 unlock of VC holdings is likely when any pent-up selling will be unleashed, potentially putting strong downward pressure on the stock (if the price is still high relative to fundamentals by then)[Source]. As an analogy, think of Beyond Meat in 2019: it held absurd valuations for months with a tiny float, but once the lockup ended ~6 months post-IPO, the stock supply ballooned and the price collapsed by over 50% in short order. Figma’s timeline is stretched longer, but the principle is similar.

  • For other short sellers: this means we may need patience and risk management. The trade “taking ages to play out” is a valid concern – you might be paying borrow fees for many months waiting for the 2026 catalyst. Additionally, during that wait, the stock could be volatile: any surprise good news or a speculative rally in tech could squeeze the shorts (especially since the float is low, even moderate buying can spike the price). On the other hand, if Figma’s business underperforms expectations or if the market turns risk-averse, the stock could grind lower even before the lockup expiry. The key is that the “natural” selling pressure from insiders will be largely absent until the agreed date, so the stock might not see a sudden waterfall decline until that changes. Instead, downside could emerge more gradually via valuation mean-reversion or sporadic smaller unlocks.

  • In summary, yes – the current ownership structure and lock-up schedule likely put a damper on immediate downside, supporting Figma’s stock above where it might otherwise trade. The float is unusually low, which buoys the price by limiting available supply and making shorting difficult. Significant, sustained selling pressure probably won’t hit until those locked shares start to unlock – particularly the big VC tranche in summer 2026[Source]. At that point, the stock’s fate will hinge on how many of those shares are sold and at what pace, as well as on Figma’s performance up to that time. Many IPOs do see price weakness as lockups expire, and Figma’s extended lock-up has essentially kicked that can down the road. Until then, the short thesis might require a longer horizon and the stomach to endure potential squeezes or carry costs. Keep an eye on any interim lock-up releases (like the employee one) and the overall market sentiment for high-growth tech stocks. But broadly, the full weight of insider selling is delayed – meaning the “real” supply-driven downside might indeed not materialize until mid-2026, when Figma’s insiders and VCs finally have free rein to sell en masse.

(VIII) Valuation Concerns: Reality Check Needed

By virtually any standard valuation metric, Figma is wildly overvalued relative to its fundamentals and peers. The only way to justify its current ~$25 billion valuation is to assume years of extraordinary growth, flawless execution, and no major competitive or market hiccups – assumptions we view as unlikely, especially in light of the numerous issues detailed above.

On Figma’s valuation: We see Figma as a case of a once good product that was overhyped and over-monetized, now stranded at an unrealistic valuation. In our view, a more appropriate valuation for Figma would be in the range of $10–15 billion (which is still generous, around 10–15x current sales, akin to premium peers).

  • Notably: $10–15B is also around the level Figma was valued in 2024 (first a Jan. ‘24 $10B mark and then a May ‘24 $12.5B tender)[Source][Source] – before the IPO mania took hold. Indeed, recall that Figma insiders were willing to sell secondary shares at $12.5B in 2024[Reuters]. Has anything fundamentally changed since then to warrant a tripling of value? Figma did grow, yes, but not 3x. The biggest change was market sentiment. And sentiment can flip.

  • One more telling fact: Adobe’s stock destroyed over $30B of value after the September ‘22 deal announcement valuing Figma at $20B. Then, in Dec. 2023, Adobe stock rose after the deal failed despite Adobe paying a $1B kill fee[Investopedia]. It’s almost as if the market said, “We’d rather Adobe eat a $1B loss than a $20B albatross.” Both moves imply investors saw Figma’s true value well south of $20B when given the deep-liquidity of Adobe stock to price it (we admit that the same depth of liquidity is not currently available in Figma’s own shares).

  • Our price target: We generally avoid giving specific price targets, but for context, if we assume Figma should trade at ~15x revenue (we view that as still too rich) on an estimated ~$1B 2025 revenue, that’s $15B. On ~600M shares (ballpark fully diluted count), that’s about $25 per share. That represents ~50% downside from recent levels. Even at 20x sales, it’s $20B -> ~$33/share. We believe this is the realm of reality—even an “upside” scenario. Customer frustration appears to be mounting and other governance issues are emerging—just as massive lockup expiries loom. Of course, markets can stay irrational longer than shorts can stay solvent, but we see catalysts for repricing are on the horizon.

Below is the output from a subset of our models (by no means exhaustive). Consider it an illustrative view of what we believe Figma’s real value is:

See details for each valuation method below. We are short Figma (NASDAQ: FIG).

Method #1: Peer Multiples (PT Range: $16-20)

  • If Figma’s ~25× EV/Sales re-rates to the group average ~10.1×, Figma’s implied drop is ~60% to match peers or approximately $20 per share PT.

  • Sensitivity: to the peer average excluding Figma (~9.0×) implies ~64% downside; to the group median (~8.1×) implies ~68% downside. Implied PT of $16-18 per share.

Figma’s EV to Sales (LTM) ratio of ~25x is well above other publicly traded peers. Data as of: November 3, 2025. Sourced via: Bloomberg Terminal.

Method #2: Adobe Market Verdict (PT Range: $10-25)

  • September 2022: We cannot emphasize this enough – the way Adobe’s stock reacted to Figma’s deal is a huge red flag on Figma’s valuation. When announced in Sept 2022, Adobe’s market cap plunged (~$30B evaporated)[Fortune], effectively saying “Figma is worth far less than $20B to Adobe” (or that Adobe overpaid so much it destroyed shareholder value). Adobe’s CEO was even grilled by analysts for paying 50x revenue for a company with ~$400M ARR – an analyst on the call asked something like “what in the world justifies this price?” (paraphrasing Fortune’s coverage[Source]).

  • The single day drop on September 15, 2022 after announcing the deal erased ~$29.5B in Adobe’s market cap (far more than the proposed Figma’s purchase valuation of about $20B—indicating public Adobe investors assigned Figma a valuation of negative $10B). Adobe stock continued lower in the weeks that followed.

  • Generous target: We’ve assigned a $5B value for Figma under this scenario, anchored to Adobe’s Sept-15-2022 reaction (≈$29.5B ADBE market-cap loss vs a $20B offer implying Figma offers ≤$0 net value to Adobe) → ~80% downside from current levels or $10 per share.

    • Note: We round to $5B to keep the point conservative. When the market could price Figma through Adobe’s liquid stock in Sept. 2022, it implied Figma’s incremental value was less than or equal to $0; today FIG’s ~6% float and scarce borrow limit similar price discovery.

On September 15th 2022, Adobe’s Market Cap dropped ~$29.5B in a single trading session following announcement of the Figma deal. Data from Bloomberg Terminal.

  • December 2023: Then, after the deal died in Dec 2023, Adobe’s stock popped, regaining value[Investopedia]. Again, Adobe’s single-session market cap change points to a dramatically lower implied valuation of Figma. This time, upon terminating the deal, Adobe’s market cap rose by ~$6.6B in a single trading day—giving Figma an implied value of ~$12.4B* (Note: *Includes the $1B cash break fee paid by Adobe). This scenario implies ~50% downside vs. Figma’s current valuation or approximately $25 per share.

On December 18th 2023, Adobe’s Market Cap increased by ~$6.6B in a single trading session following termination of the Figma deal, despite Adobe having to pay Figma a $1B cash break fee. Data from Bloomberg Terminal.

Figma’s price discovery is broken—tiny float, thin liquidity, scarce borrow. Adobe’s deep liquidity provides a clean read-through on Figma’s real value.

Method #3: DCF Analysis (PT Range: $5-20)

Bottom line: Conservative base‑case DCF implies ~$10.3B enterprise value for Figma or approximately 60% implied downside vs. Figma’s current value. Implied PT: $20 per share.

Scope and anchor:

  • Base year: 2025 revenue = $1.0B (estimate).

  • Forecast window used: 2026–2033. Terminal value at end‑2033.

  • Revenue growth: +25% YoY through 2033.

  • Operating margin ramp: 15% (2026) → 20% (2027) → 25% (2028 onward).

  • Taxes: 25%.

  • Free cash flow proxy: FCF ≈ NOPAT (assumes D&A ≈ capex and negligible working‑capital drag). (This is favorable to value)

  • Discount rate (WACC): 10%.

  • Terminal growth (g): 3%.

Key outputs

  • EV from explicit period PV(FCF) ~$2.65B.

  • PV of terminal value ~$7.67B.

  • Total EV ≈ $10.32B.

  • ~74% of EV comes from the terminal bucket. Concentrated in out‑years.

Sensitivity (single‑point changes):

  • WACC 12% (g 3%): EV ~ $7.57B (‑27%).

  • g 2% (WACC 10%): EV ~ $9.30B (‑10%).

  • WACC 12% & g 2%: EV ~ $7.01B (‑32%).

  • Peak margin 20% (vs 25% from 2028): EV ~ $8.26B (‑20%).

Interpretation:

  • The model already assumes unchanged 25% growth through 2033 and best‑in‑class 25% EBIT margins by 2028. Any degradation in growth or sustained reinvestment needs lowers value quickly.

  • Three‑quarters of value sits in the terminal. Limited near‑term cash support.

  • The FCF ≈ NOPAT simplification is optimistic for a scaled design SaaS platform; adding modest capex/working capital would push EV below $10B.

  • Without share count and net cash data, equity value per share is not computed; debt, cash, SBC overhang, and options dilution are relevant headwinds to bridge EV → real future equity value (mainly headwinds).

Bear-case DCF → Enterprise value ≈ $2.1B.

  • Using ultra conservative assumptions the bear DCF yields EV ≈ $2.07B (vs. our base case EV ≈ $10.3B). This implies ~92% downside or a PT of roughly $5 per share (rounded).

    • Assumptions (bear case): 2025 revenue anchor $1.0B; revenue growth 15% p.a. (2026–2033); operating margin ramps to 20% by 2028 (12% in 2026, 16% in 2027); tax rate 25%; reinvestment = 5% of revenue each year; WACC 12%; terminal growth 2%.

    • Economics (selected years, $B): 2026 rev 1.15 | FCF 0.046. 2028 rev 1.52 | FCF 0.152. 2033 rev 3.06 | FCF 0.306. PV(FCF 2026–33) ≈ $0.81B. PV(Terminal) ≈ $1.26B. Terminal share ≈ 61% of EV.

    • Multiples and framing: EV / 2025 revenue ≈ 2.1×. Under these realistic downside inputs the stock’s current market cap would need to reflect dramatic execution risk, lower growth, higher reinvestment, or a much higher WACC to justify the consensus $68 implied optimism.

  • Importantly: this bear case still assumes meaningful growth and margin expansion (~3x of revenue modeled to $3B by 2033). If real reinvestment needs, customer churn, or pricing pressure are worse, EV falls further. Conversely, strong outperformance on growth or margins would lift value — admitting we could be wrong.

Method #4: Figma’s “Internal” Valuation (PT Range: $30-35)

  • Timeline and pricing:

    • Dec 18, 2023: Adobe terminates the $20B Figma deal and pays a $1B cash break-up fee.

    • Jan 23, 2024: Figma resets internal valuation to $10B and offers an employee program: equity refresh at $10B and a voluntary exit with three months’ cash while keeping vested equity.

    • May 16, 2024: Figma runs a $12.5B tender for $600–$900M of stock, letting employees and early investors sell to new buyers (Fidelity, Franklin) and existing VCs (Sequoia, a16z); company characterized as cash-flow positive.

  • Valuation gap and implied EV:

    • A $10B equity mark one month after receiving $1B cash implies EV ≈ $9B by simple net-cash math, less than half of Adobe’s prior $20B price. The magnitude and speed of the reset create clear fairness and information-asymmetry concerns.

  • Price discovery signals:

    • The $12.5B tender just four months later indicates that arm’s-length buyers were willing to pay 25% higher than the January mark, suggesting the $10B internal price was conservative and potentially non-market.

  • Liquidity direction and concentration:

    • The May structure channels liquidity from employees/early holders to outside and existing institutional investors, including incumbent VCs, which concentrates control among sophisticated buyers and reduces employee ownership at a lower prior reference price.

  • Governance and process risk:

    • Management set the January price and timing immediately after a known $1B cash windfall, while employees faced inferior price discovery versus the May tender. This sequencing transfers value from less-informed sellers to better-informed holders/buyers.

For this valuation method: we’ll ignore the obvious questions and take the two 2024 rounds of $10B and $12.5B at their face. We then “bring them forward” to the current market using the monthly performance of the Nasdaq (QQQ) index. Implied valuations below:

  • January 2024 starting value of $10B —> QQQ up ~49% since January 2024 (as of Nov. 3, 2025) —> Implies $14.9B valuation —> Implies 39% downside vs. Figma’s current price or about $30 per share.

  • May 2024 starting value of $12.5B —> QQQ up ~39% since May 2024 (as of Nov. 3, 2025) —> Implies $17.4B valuation —> Implies 29% downside vs. Figma’s current value or approximately $35 per share.

Question for management:

  • Who determined the $10B January 2024 mark and what independent benchmarks were used? Did any insiders or board-affiliated funds buy during January or pre-tender secondaries? Why wasn’t broad liquidity offered at $12.5B terms simultaneously to January participants? Please provide board minutes or fairness support for the January program.

Method #5: Analyst Consensus (PT: $49-85)

  • Consensus: 10 analysts cover Figma with 6 providing price targets; average target $67.57 (~$68) vs last $45.85 implies +47%; rating 3.60; LTM return +38.9%. As of Nov 4, 2025.

    • Skew: 30% Buy, 70% Hold, 0% Sell; targets cluster $65–$70 (RBC $65; MS/WF $70), with Piper $85 high and Goldman $49 low.

    • IPO involvement: Joint lead book-runners were Morgan Stanley, Goldman Sachs, Allen & Company, and J.P. Morgan; BofA Securities, Wells Fargo Securities, and RBC Capital Markets acted as book-running managers; William Blair and Wolfe | Nomura Alliance were co-managers.

  • Our view: We disagree. Even on generous growth and margin ramps, our DCF supports a much lower equity value. We could be wrong, but we have trouble understsanding these valuations.

Analyst Consensus of ~$68 per share pulled from Bloomberg Terminal on November 4, 2025.

(IX) Disclosure of Short Position

We are activist short sellers. All analyses in this report reflect our opinions as of November 4, 2025. At the time of publication, we hold a short position in Figma, Inc. (FIG) via put options. This means we stand to realize gains in the event of a decline in FIG’s share price. We are biased – we believe FIG is overvalued and that the information presented in this report justifies that view. Readers should understand our economic incentive and make their own judgments accordingly.

Information in this report is obtained from public sources* – including Figma’s SEC filings, company communications, third-party analysis, and user-generated content on social media and forums. We have cited sources extensively. We have not received any non-public information from Figma or its employees; however, we have benefitted from the candid testimonies of many Figma customers posted publicly.

*We reached out to Figma’s IR Team on October 31, 2025. Their General Counsel’s reply is abbreviated in the “Undisclosed Cybersecurity Breach” section above. No non-public documents or additional substantive information were provided.

We did not provide advance copies of this report to Figma or any other entity, nor did we consult with Figma for comment prior to publication. Everything herein is our opinion based on our research. We welcome dialogue and will correct any material factual errors if brought to our attention with supporting evidence.

Disclaimer: This report is not investment advice or a recommendation. It reflects our opinion which is by nature subjective. We make no representation that the stock will perform as we expect – do your own due diligence. Investing long or short in securities (particularly high-valuation, volatile tech stocks like FIG) carries substantial risk of loss.

With that said, we firmly stand by our analysis. We have put our money where our mouth is by taking a short position via put options. If Figma’s stock declines, we will profit, and vice versa. We believe in transparency of motives – hence this section – something we wish Figma’s management practiced with equal enthusiasm (e.g., disclosing issues to investors and customers proactively and transparently).

Our goal is to shed light on what we see as a significantly mispriced stock and severely mismanaged company. Activist short selling plays a role in keeping markets honest, and we think FIG investors have not been getting the full story. We encourage readers (bullish or bearish) to examine the evidence we’ve presented, check the sources, and decide for themselves if Figma is truly the golden goose it’s made out to be, or if cracks are forming beneath the shiny veneer.

(X) Questions for Management

In light of the findings above, we pose the following critical questions to Figma’s management. We urge the company to address these directly. We also offer to publish Figma’s full, unedited written response to these questions and to give it equal prominence. (Transparency and dialogue are in the best interest of shareholders.)

  1. Undisclosed Data Access Incident(s): Will Figma officially confirm whether in 2025 a sales representative(s) accessed a customer’s file names or data without permission (as described in the “Pistachio” incident)? Why was this not disclosed as a material event to all customers and investors? Does Figma consider file metadata access a security breach? Please detail what steps were taken (investigation scope, outcomes, policy changes) and explain how this incident was deemed immaterial under SEC disclosure rules[Harvard Law].

  2. Internal Access Controls: Who at Figma (which roles/levels) can access customer files or file names? Are there audit logs of such access and have they been reviewed for abuse? Has Figma conducted a thorough review to ensure sales or other staff cannot peek into customer content? If so, when will the results be shared? If not, why not, and when will you conduct such an audit?

  3. Sales Tactics and Complaints: How many complaints have been lodged about Figma’s sales practices (e.g., aggressive pressure, unauthorized upgrades, misleading claims) in the past 2 years? (We are aware of many anecdotally – we want the official count.) What has management done to curb the “dark pattern” billing issues that customers widely reported[Reddit][Reddit]? Do you acknowledge that auto-adding seats without admin approval or notification was a mistake? Will Figma commit to refunding customers who were unwittingly charged for seats they didn’t intend to add?

  4. Change in NDR Definition: Figma’s S-1 defines Net Dollar Retention as applying only to customers with >$10k ARR[Blog], excluding the majority of your customer base. Is this a change from how you or your board tracked NDR historically? If so, what would NDR have been including all customers, for 2022, 2023, and 2024 respectively? Please also quantify how much of the NDR in 2024 and 2025 was driven by one-time price increases, promotions, or cross-sells (FigJam/DevMode) as opposed to seat expansion.

  5. Sustainability of NDR and Growth: After the March 2025 pricing changes, what is Figma’s blended NDR so far in 2025 including the impact of those changes? (Investors will learn this eventually; better to be upfront.) Similarly, what is your guidance or expectation for revenue growth in 2026, and how will you achieve it without relying on further price hikes or dark patterns? If growth decelerates, how do you justify Figma’s current valuation multiple?

  6. Insider Sales and Lockup: Can you provide full transparency on any insider or early investor stock sales that have occurred via tender offers or secondary transactions in the two years prior to the IPO (2023–2024)? We note the May 2024 tender at $12.5B[Reuters], which followed a January 2024 “internal” valuation reset to $10B (just ~30 days after the $20B Adobe deal was terminated) – did any current executives or board members sell or purchase shares in either round? Looking ahead, can you confirm that no directors or executives will sell stock before the regulated lockup expiry (other than any automatic 10b5-1 plan sales disclosed)? How should investors interpret the disparity between the $10B and $12.5B valuations at which insiders were sellers and the ~$25B valuation today? Are insiders — including VC funds — planning to significantly reduce their holdings once able?

    • From earlier: Who determined the $10B January 2024 mark and what independent benchmarks were used? Did any insiders or board-affiliated funds buy during January or pre-tender secondaries? Why wasn’t broad liquidity offered at $12.5B terms simultaneously to January participants? Please provide board minutes or fairness support for the January program.

  7. Adobe and Competitive Landscape: Adobe’s investors clearly signaled that Figma at $20B was value-destructive[Fortune]. Why do you believe public investors should value Figma at ~$25B? Did Figma’s abusive marketing and sales tactics play a role in regulatory bodies opposing the Adobe deal on anti-competitive grounds? What long-term independent growth and profit trajectory can you share to support the current valuation? Additionally, how is Figma addressing the competitive response from Adobe (which has been integrating Figma-like features into XD or other tools) and emerging competitors (e.g., Canva moving into your space, open-source Penpot gaining traction)? Further, how will Figma’s aggressive—potentially fraudulent—sales tactics impact future marketplace perception of Figma versus its peers? In other words, what prevents your growth from slowing materially as the market adapts, aggressive pre-IPO manipulation rolls off, and competitors continue to innovate?

  8. User Trust and Reputation: Do you acknowledge that trust has been damaged among some of your core user base (design community and team admins) due to the issues mentioned? What specific actions are you taking to rebuild goodwill (if any)? For instance, will you publicly commit to certain ethical standards in sales, or improve customer success/support to win back loyalty? Will you be offering overcharged customers refunds? Please quantify (in dollars) how much customers have been overcharged and the size of aggregate invoice complaints.

  9. Regulatory Risk: Has Figma been contacted by or is it aware of any inquiries from regulators or authorities regarding either (a) its data privacy/security/cybersecurity practices, or (b) its sales/billing practices? (For example, any FTC consumer protection inquiry or foreign data protection authority query?) If yes, provide details. If not, explain why you believe Figma’s practices would not trigger such scrutiny given the patterns described.

We believe these are reasonable questions that any diligent investor would want answered. Figma’s response (or refusal to respond) will speak volumes about management’s integrity and the health of the business.

As promised, we will publish Figma’s response verbatim if they provide one. We hope they take this opportunity to address investor concerns in a factual and transparent manner.

Sources and Citations

Below is a list of key public sources we consulted and cited in our research. We encourage readers to review these materials directly:

• https://www.businessinsider.com/who-got-rich-on-figma-ipo-2025-7

• https://creative-boost.com/adobe-acquiring-figma/

• https://www.investopedia.com/adobe-stock-rises-after-abandoning-usd20b-deal-to-buy-figma-citing-regulatory-hurdles-8417318

• https://www.reuters.com/technology/figma-valued-125-billion-tender-offer-backed-by-fidelity-others-2024-05-16/

• https://www.reddit.com/r/FigmaDesign/comments/1g16h9m/another_liability_issue_with_figma/

• https://corpgov.law.harvard.edu/2024/11/04/sec-charges-four-companies-for-misleading-cyber-disclosures/

• https://www.reddit.com/r/FigmaDesign/comments/1nk7f2h/is_this_typical_of_your_figma_account_rep/

• https://newsletter.pricingsaas.com/p/inside-figmas-pricing-evolution

• https://www.saas.wtf/p/the-figma-nrr-deep-dive

• https://siliconangle.com/2025/07/01/figma-makes-ipo-plans-public-following-earlier-confidential-sec-filing/

• https://www.reuters.com/business/figma-targets-188-billion-valuation-us-ipo-after-bumping-up-price-range-2025-07-28/

• https://www.mostlymetrics.com/p/figma-ipo-s1-breakdown

• https://www.reddit.com/r/FigmaDesign/comments/1ewxhey/figma_data_leaks/

• https://www.reddit.com/r/FigmaDesign/comments/1kkb5ju/dark_patterns_with_everything_involving_seats/

• https://kamushken.medium.com/the-hidden-cost-of-collaboration-in-figma-and-how-to-avoid-extra-charges-121e3d6d3fd5

• https://www.reddit.com/r/FigmaDesign/comments/1b7tt72/figmas_payment_structure_is_absolutely_ridiculous/

• https://help.figma.com/hc/en-us/articles/27468498501527-Updates-to-Figma-s-pricing-seats-and-billing-experience

• https://figmalion.com/issue/193

• https://www.cloudeagle.ai/blogs/figma-pricing-guide

• https://www.wing.vc/content/observations-on-the-adobe-figma-acquisition-termination

• https://www.reuters.com/technology/adobe-figma-terminate-20-bln-deal-2023-12-18/

• https://www.sec.gov/Archives/edgar/data/1579878/000162828025033742/figma-sx1.htm

• https://www.tradingnews.com/news/figma-stock-nyse-fig-falls-sharply-from-ipo-highs-as-growth-cools

• https://secfi.com/newsletter/figmas-ipo-pricing-analysis

• https://simplywall.st/article/the-2025-ipo-wave-winners-losers-and-what-investors-should-watch

• https://www.investing.com/news/stock-market-news/instacarts-lowfloat-ipo-strategy-under-scrutiny-after-successful-debut-93CH-3177945

• https://www.reuters.com/technology/design-software-maker-figmas-shares-surge-158-blowout-market-debut-2025-07-31/

• https://companiesmarketcap.com/figma/cost-to-borrow/

• https://www.marketbeat.com/instant-alerts/figma-inc-nysefig-short-interest-up-573-in-september-2025-10-06/

• https://www.marketbeat.com/stocks/NYSE/FIG/short-interest/

• https://www.spglobal.com/marketintelligence/en/mi/research-analysis/short-selling-recent-ipos.html

• https://www.acadian-asset.com/au/investment-insights/owenomics/float-like-a-butterfly-fall-like-a-brick

• https://www.ainvest.com/news/figma-14-drop-lockup-expiry-bitcoin-exposure-future-design-tech-treasuries-2509/

• https://www.stocktitan.net/news/FIG/figma-to-announce-third-quarter-2025-financial-results-on-november-5-1rl4o1mdb6xm.html

• https://fortune.com/2022/09/16/adobes-20-billion-deal-to-acquire-figma-leaves-some-skeptical/

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