So blocking a sale at a $20B valuation so the company can IPO at a $19.3B valuation 3 years later (a loss of $700M in value over 3 years) is a success?
Even from capital point of view everyone is now forced to make their bet - either on adobe or figma, so it’s more efficient capital allocation too.
- sell the company to a bigger player, reinforcing their dominant position (often close to monopolistic in tech).
- go to IPO, keeping the company independence and fighting power concentration.
People keep coming up with theories that companies are about to corner the market then over-charge, but the theories vastly outnumber the cases where it ever happens in practice. It is almost always that the biggest companies in the market are just more competitive (lower prices or higher quality) than all the others.
A clone would need to start from scratch and compete against a huge corporation with virtually unlimited funds.
> It is almost always that the biggest companies in the market are just more competitive (lower prices or higher quality) than all the others.
That is almost always not what is happening. The big players extinguish any would-be competition early by buying them or throwing sticks into their wheels. They can afford to strategically make a loss in a given area to underbid the competition by overcharging in others, or relying on synergies. There are numerous examples where small teams built highly qualitative alternatives to corpo stuff, but had to compete against the network effects and brand names instead.
2. Yes, Figma luckily IPOed in an extremely hot market
Getting a bit lucky doesn't mean this was a success overall. The conclusion has many more years to go before it gets written. Either way, I don't like the over reach by Lina Khan.
I said sort-of because the economics of this is more complicated. Investors lose their preferences when they sell in an IPO, so this is probably better for common stock holders.
I don’t think 19.3 B is their current market cap, it’s only what was sold at the IPo. Anyway, 19.3 instead of 20 would have been no big deal IMO
Adobe certainly lost money, because they have had to compete against the better product, so have been able to charge less for their own offering. And will presumably continue to do so until further notice.
Any employees who would have been swiftly laid off after the acquisition should certainly be glad for this outcome. They still have jobs, and if there are layoffs after the IPO it will be less dramatic. If they had equity, they probably got a much better deal in an IPO, especially if they sold some of it off after the “pop”.
A company exists primarily to make things for consumers and the FTC ensures they do that fairly. The IPO, stock price and everything else is secondary.
What do you mean over reach? It's the FTC's job to prevent consumer market consolidation.
Also, the EU and UK also made it clear they were against the merger. In fact, if you look at most reporting, the EU and UK seem to be the main reason they gave up, presumably because they know the US FTC has no teeth, even with a competent chair.
I don't have a popular opinion on HN. I don't think Google should be broken up because new technology has made Google search much less needed. I don't think Apple should relinquish control over its app store because it's Apple's platform and they should do what they want. I don't think Adobe should be stopped from buying Figma because even if Adobe buys it, maybe some rich ex-employees might quit and make another competitor or make an open source alternative. Who knows.
People on HN wants the government to weaken tech companies but not when it's the tech company they're working in.
In any case, it's irrelevant they are not eternal (especially if we go from monopoly to monopoly), the point stands: if you have a monopoly you don't have freedom and free market doesn't work at all.
Obviously this is a YC forum and many people have a startup bias, but I'm nowhere near that scene. Many startups do even worse things than some of the big guys, because they aspire to become them. The "burn investor money to get market share at a loss, kill all competition, become a monopoly, then enshittify and make infinite money" strategy wouldn't be nearly as effective if we had proper antitrust enforcement.
Free market requires maintenance. Laissez-faire is a lie and always has been.
If you let all the companies consolidate into mega monopolies who have a stranglehold on the market, where is the free market?
The market works best with competion. It's better for the workers, the customers, society and innovation in general.
A giant monopoly buying potential competitors is bad for everyone other than owners of that giant monopoly.
Caplan said it best. The market is great at doing good things that sound bad. The government is great at doing bad things that sound good.
Regulations are literally the only thing slowing down the corporate dystopian future.
Mergers trigger layoffs
I can understand you looking at the headline valuation but as an independent company traded with lots of potential to grow with AI tools their stock will probably double… a quick Google appears to suggest a 250% uplift from the IPO price so the company would potentially have added $58bn (the figure I’ve seen quoted) to Adobe’s bottom line.
Lina Khan was right at least on this merger!
But also as you said this is 3 years later, which is a long time in the tech business and all sorts of things have changed, positive and negative... so she's not clearly right either...
I know that because if the metric you cite was something that the investors and managers cared about, they could have done other things to boost it (see footnote 1). They didn't, ergo they don't consider that metric to be a useful gauge of the company value. It sure looks like you tried to find the worst performing metric to claim that there was a loss, when so far this has been a major win for the shareholders(2).
1: If you don't want this and want to IPO at the highest valuation, you do a direct listing like Spotify did, or a SPAC reverse merger like Trump Media did. But there are reasons that the vast majority of companies choose to do a traditional IPO. For most companies, this is a one-time transaction that will make the managers very very rich, and they want to get the best guidance on navigating it- and are willing to pay handsomely for that guidance, since this is the only time in their lives they will be CEO for a major company that is starting to list. So they follow the IPO/greenshoes/pop route.
2: The most important nuance on that statement is that it took them a year and a half to extract that extra value by doing an IPO, and now they are exposed to market risk. We will have to see what the market conditions are like in another few months when the lock-ups expire.
Also, Adobe was massively overpaying, arguably even if you consider that. Even if you assume it was due to seeing Figma as a huge competitive threat the stock nosedived due to the acquisition price.
Investors can feel free to hold onto their remaining shares and sell whenever they want, outside of a window following the IPO where they can’t.