Figma priced its initial public offering at $33 a share on July 30, 2025, a dollar above the top of its expected range, and began trading on the New York Stock Exchange the next day under the ticker FIG. Shares opened around $85 and closed the first session near $115.50, a roughly 250% gain from the offer price, according to Figma's pricing announcement and same-day reporting. For the design software company's employees, many of whom hold stock options or restricted stock units accumulated over years as a private company, the debut converted paper wealth into a concrete and sometimes unexpectedly large tax obligation.
What changed
Before the IPO, Figma employees could see their equity's value change on paper with each private financing round, but had no ability to sell and no tax event unless they exercised options. The public listing changed both: employees with vested restricted stock units generally recognize ordinary income as units settle and shares are delivered, while those holding stock options face a choice about when to exercise, a decision that becomes far more consequential once a $33 grant-date reference point is replaced by a market price several multiples higher.
Who is affected
Figma disclosed roughly 23 million Class A stock options outstanding with a weighted-average exercise price of $9.77, plus a smaller pool of Class B options at a $23.19 average strike. Employees who exercised those options early, while the company was still private and the spread between strike price and fair value was small, locked in a low cost basis and started the clock on long-term capital gains treatment. Employees who waited until after the IPO to exercise face ordinary income tax, and potentially alternative minimum tax for incentive stock options, on a spread now measured against a market price many multiples above the strike.
The after-tax math
Example: an employee holds 10,000 incentive stock options with a $10 strike price. If those options were exercised back when the stock was worth $12 a share, the taxable spread at exercise was just $2 a share, a modest AMT preference item. Selling the resulting shares more than a year later at $115.50 produces a $105.50-per-share long-term gain, taxed federally at 20% plus the 3.8% net investment income tax, for a combined rate of 23.8%. In California, which does not offer a reduced rate for long-term gains, state tax adds roughly another 13.3% at the top bracket, pushing the effective total near 37%.
By contrast, an employee who held the same options unexercised until after the IPO and then exercised and immediately sold recognizes the entire $105.50 spread as ordinary compensation income in one year. At combined federal, state and payroll rates that can exceed 50% in California for high earners, the tax bill on the same 10,000 shares is roughly $150,000 higher than for the employee who exercised early and held for long-term treatment.
| Approach | Character of $105.50 spread | Approx. combined CA rate |
|---|---|---|
| Exercised early, held 1+ year | Long-term capital gain | ~37% |
| Exercised and sold at/after IPO | Ordinary income | ~50%+ |
What to watch
Most pre-IPO employees remain under a standard lockup agreement that limits sales for a period after the debut, meaning the tax consequences of any exercise decision are not automatically converted into cash on day one. Restricted stock units carry their own timing issue: employers commonly withhold shares at a flat statutory rate that can fall well short of an employee's actual marginal tax rate once combined with a large first-year income spike, leaving a balance due at filing. Employees with concentrated Figma holdings, especially those in California facing both federal and state exposure, often work through exercise and sale timing with a tax professional well before a lockup expires rather than after, since options exercised after the stock has already moved cannot recreate the lower-basis, long-term treatment available to those who exercised earlier.
Sources
- First reported Figma Announces Pricing of Initial Public Offering — Business Wire / Figma
- Figma prices IPO at $33, above expected range — CNBC
- Figma IPO shows the cost of waiting to exercise stock — Secfi
- Figma's IPO price hit a $19.3B valuation out of the gate — TechCrunch
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
