Figma’s IPO highlights the divide between retail and institutional investors

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The illusion of a level playing field

When Figma went public, it looked like the ultimate win for everyone. Shares priced at $33 and by the end of the first trading day, they closed around $115. On paper, that’s the kind of return most investors dream about - triple your money in a few hours.

But here’s the catch: not everyone was playing the same game.

The institutions and insiders who got IPO allocations at $33 were cashing in while the confetti was still falling. Retail investors - the everyday folks watching CNBC or logging into their trading app - first saw shares open around $85, and many bought in as the price ran up toward $115.

Same stock, same day, completely different outcomes.

And that’s the uncomfortable truth about IPOs: they look like an open party, but the best seats were reserved long before you even got an invite.

How IPO allocations really work

On paper, an IPO sounds democratic. A company lists its shares, and anyone can buy them. In reality, the good seats are already taken before the curtain even rises.

Here’s how it plays out:

• The bank sets the price. For Figma, that was $33 a share. But those shares weren’t available to you or me.

• Allocations go to institutions. Big funds, hedge funds, and long-standing clients of the underwriters get first dibs. They’re the ones buying at $33.

• Retail gets leftovers (at a markup). By the time trading opens on your brokerage app, the hype has likely pushed the stock into the $100s. You’re not buying value; you’re buying the premium created by scarcity and demand.

This isn’t an accident - it’s the design. Underwriters want to keep their best clients happy, and institutions want guaranteed wins. Retail investors? They’re the liquidity that makes the whole system work.

Figma’s IPO just made the divide glaringly obvious: institutions pocketed gains while retail paid the hype price.

Retail investors: late to the party

By the time most everyday investors had the chance to buy Figma, the music was already blaring and the drinks were half gone.

When shares opened to the public, they were trading at more than 3x the IPO price. That meant institutions were already sitting on huge gains while retail investors were paying top dollar just to get through the door.

It’s a pattern we’ve seen before:

• Robinhood’s IPO gave early institutions quick profits while retail buyers saw the stock slump.

• Rivian soared on opening day, then slid as reality caught up.

• Lyft promised riches, but most of the gains went to insiders cashing out at peak hype.

The story is the same every time. By the time retail can buy in, the easy money’s been made. Instead of owning the upside, they’re left holding shares priced for perfection.

Figma didn’t break that cycle - it just spotlighted it.

Why institutions always win

Institutions don’t just get lucky with IPOs - they’re set up to win. The system is tilted in their favor from the start.

Here’s why:

• Guaranteed allocations. Big funds get first access to IPO shares at the lowest price. For Figma, that meant $33 - a no-brainer when they knew demand was through the roof.

• Built-in arbitrage. Institutions can flip those shares on day one, selling them at $100+ to retail investors desperate to get in. That’s instant profit with almost no risk.

• Relationships matter. Banks and underwriters want to keep their largest, most profitable clients happy. That means prioritizing institutions every single time.

• Network effects. Institutions talk, coordinate, and feed off each other’s momentum. Retail investors? They’re left chasing headlines and social media chatter.

The result is predictable: institutions capture the lion’s share of IPO upside, while retail provides the exit liquidity.

Figma wasn’t an exception - it was a textbook example of how the game is played.

The bigger problem: access inequality

The Figma IPO wasn’t just a one-day spectacle. It was a reminder of how unequal access to wealth creation really is.

Public markets are marketed as “open to everyone,” but the real upside is already spoken for. By the time a company hits Wall Street, institutions have had years to invest privately at lower valuations - and they still get first dibs at IPO pricing.

Meanwhile, retail investors face two walls:

• In public markets, they buy after institutions, often at inflated prices.

• In private markets, they’re usually locked out entirely by accreditation rules and sky-high minimums.

It’s a two-tier system: insiders get access to compounding growth, while everyone else is left to fight over scraps once the story is fully priced in.

Figma just made the imbalance crystal clear. The wealth gap isn’t just about who earns more - it’s about who gets invited to invest early, and who doesn’t.

Lesson for the unsophisticated investor

If you only remember one thing from Figma’s IPO, let it be this: the stock market isn’t a level playing field. By the time you’re allowed in, the insiders have already eaten.

That doesn’t mean you should give up on investing. It means you need to reframe how you think about opportunity:

• Don’t chase IPO pops. They’re designed to make institutions money, not you.

• Play earlier in the curve. The biggest returns come from getting in before the hype cycle starts, not buying once CNBC is broadcasting live from the trading floor.

• Think long-term. Wealth isn’t built in the noise of day-one trading - it’s built patiently, over years, in spaces where access and time do the compounding for you.

Figma shows us what happens when access is unequal. The insiders walked away with generational returns. Retail? They were left holding a very expensive bag.

The lesson: if you want to stop being someone else’s exit liquidity, you need to start looking where the exits haven’t happened yet.

What we’ve been working on at Shuttle

• Developing and implementing our new marketing strategy to see us through of 2025

• Speaking with HR teams about listing Shuttle as an Employee Benefit (email [email protected] for details)

• Continuing the validation of our next product

The Unsophisticated Investor is brought to you by Scott & Rob, the founders of Shuttle. We’re both sick of private markets being a playground exclusive to the ultra-wealthy so we started a company to challenge the status-quo. Shuttle’s singular focus is to unlock private markets for Millennial and Gen Z tech professionals and help them build wealth through the highest performing private market opportunities.

Scott & Rob
Shuttle Co-Founders