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Adobe shares tank 17% following $20Bn Figma acquisition announcement

Adobe shares tank 17% following $20Bn Figma acquisition announcement

Shares of computer software giant, Adobe Inc., reportedly dipped 17% after it announced the acquisition of Figma, a design software company, for approximately $20 billion in cash and stock.

Reports claim, this is the biggest share price drop the company has recorded since 2010.

Figma, which reached a valuation of $10 billion in its last funding round in 2021, develops cloud-based design software that enables real-time collaboration among teams, rivaling Adobe’s XD program.

The list of the company’s backers includes names like Kleiner Perkins, Greylock Partners, and Index Ventures.

Earlier, sources had claimed that Figma will  generate over $400 million in its annual recurring revenue for this year. Adobe has now confirmed that Figma's ARR will exceed $400 million by the end of 2022.

This indicates that Adobe is paying around 50 times the revenue in a period where sales multiples of cloud software are declining rapidly after hitting record highs in 2021.

This deal is also one of the most expensive by Adobe, which led to a steep decline in its shares post-announcement. Investors are also becoming increasingly dubious of the firm’s dominance in the design software market, which accounts for 60% of Adobe’s total revenue.

Adobe stated that it will integrate a few features from its products, like photography, illustration, and video technology, into Figma’s platform.

Shantanu Narayen, CEO of Adobe, stated that the company’s greatness is in its ability to make new categories and offering cutting-edge technologies via organic innovation and inorganic acquisitions.

Narayen added that the combination of Figma and Adobe is transformational and will help further Adobe’s vision for collaborative creativity.

Post-closure of the deal, Dylan Field, co-founder and CEO of Figma, will continue running the firm, and report to the President of Adobe’s digital media business, David Wadhwani.

Adobe also posted its third-quarter results, which saw adjusted earnings of $3.40 per share, surpassing the analyst expectation, and $4.43 billion in revenue, matching their estimates.

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Meghna Singh

An English Literature graduate, Meghna Singh ventured into the profession of content development to incorporate her knack for writing articles across verticals including technology, healthcare, business, and alike for News Origins and Newsorigins. She has also completed her MBA in Tourism and worked as a content creator in the field of product development.