Figma’s IPO is Finally Here, Fed Holds Rates Steady & Amazon’s $20M AI Licensing Deal with the NYT

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This month on Explain It to Me, we're talking about all things wellness.

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Today's number,

10.

That's how many smartphones are stolen by monkeys per day at the Uluwatu Temple in Bali.

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In other news, Howard Luttnick was recently spotted in the jungle speaking to monkeys.

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Money markets, masters.

If money is evil, then that building is hell.

Show goes up!

Sell!

Welcome to Profit Markets.

I'm Ed Elson.

It is July 31st.

Let's check in on yesterday's market vitals.

The SP 500 and the Dow declined following the Federal Reserve's interest rate decision.

More on that later.

The yield on tenured treasuries climbed and the dollar rose for the fifth day in a row.

Meanwhile, the Nasdaq rose ahead of Meta and Microsoft's earnings.

Meta stock ripped 10% in after-hours trading after the company reported a revenue increase of 22%

year-over-year.

That beat out analyst expectations by nearly $3 billion.

Microsoft stock got a 7% pop after posting a powerful beat with Azure revenues up 34% year over year.

The company also raised their CapEx guidance for the year by $10 billion.

Tune in on Monday for a full breakdown on all of the big tech earnings from this week, including tonight's reports from Amazon and Apple.

Okay, what else is happening?

One of tech's most anticipated IPOs is finally here.

Design software firm Figma is set to go public today, targeting a nearly $19 billion valuation.

The offering is expected to raise around $1.2 billion at current pricing.

So Figma's moment has finally come.

We discussed this IPO a couple of weeks ago.

I explained why this is the only IPO in 2025 that we're actually excited about.

We've seen a bunch of quote-unquote hot IPOs in 2025, but most of them have been unimpressive and mostly crypto-adjacent companies, certainly not companies that we want to invest in for the long term.

Figma, however, is the exception.

As we discussed, this actually is an impressive company.

They've built an incredible business.

They have an amazing design product.

They are, in a lot of ways, endemic to the startup ecosystem at this point.

In sum, Great company.

And if you want to hear more about why we think that, go check out our episode from July 3rd, where we run through all of the numbers.

So that's where we stand.

And it appears that the market is beginning to feel the same way.

The IPO was originally priced at around $25 per share.

That's where they started the roadshow.

And then by the end of the roadshow, based on the feedback and the demand, they're now pricing this at a range of $30 to $32 per share.

According to a Bloomberg report, the IPO is almost 40 times oversubscribed now.

So that really would make it the hottest IPO of the year.

And therefore, my prediction, we're going to see a huge pop in the stock price today.

And in my view, a warranted pop.

I think this company is worth at least $20 billion.

And the current pricing values it at less than $19 billion.

But let's give Scott a call.

Let's see if he has a prediction for us.

Perhaps he agrees with me.

Perhaps he disagrees.

Let's find out.

Hey, Scott.

How are you, Ad?

I'm doing well.

How are you?

I'm good.

I'm indoors where my air conditioning is screaming at you.

You're asking a lot of me.

I may break down at any moment.

It's about 140 degrees here, Ed.

It's pretty hot here in New York.

It's terrible.

Is your AC working?

Is that the problem?

At the moment, but fortunately, I only pay $11,000 a month in HOA fees.

So

you get what you pay for, which means my air conditioning can go out at any moment.

Yeah, love it.

Well, we want to get your take on Figma about to go public.

I'm very bullish.

I've made my case.

What are your views on this IPO?

What do you think we can expect?

Well, two people that I trust immensely.

The first is Catherine Dylan, who teaches a course on visual language at

people that know Ed Ellison gets some of the credit.

Scott Gallery gets most of the credit.

But the real strength here is Catherine Dillon.

And she's a professor of the arts at...

at TISH, and she's not easily excited.

And when we talked about Figma a couple of years ago, she said, the first thing I have my students do is learn Figma.

And then you weighed in saying that you thought it was a great IPO.

And I've been looking at it.

By the way, just in the spirit of full transparency, I'm desperately trying to find shares in this thing.

And the funniest thing was I called a friend or a guy I've dealt with at an investment bank that I have some money with.

And he picked up the phone and said, Scott, I cannot get you shares in Figma.

He knew exactly what I was calling.

He knew.

He knew what I was calling.

Wow.

Look, so in a world of AI, everything looks kind of anodyne and you can create a website, but design still is at an enormous point of differentiation.

And if you look at both Atlassian and IBM, and I thought this was telling,

the ratio of designers to coders that they hire has gone from like one to 50 or one in 70 to one in 10.

And that is the corporate world realizes the power of design.

Adobe, which is an incredible company, some people would argue has become over-engineered.

It's got $150 billion market cap.

They kind of own the space.

Canva came out.

I would argue Canva is sort of the entry-level kind of clip art player.

And then Figma has swept in and has said, okay,

there is a middle ground.

There is an E class in between the C and the S class.

That's a Mercedes metaphor.

But this company is just incredible.

If you look at...

Look at Uber.

Uber burnt $21 billion from 2009 to 2021.

This company has raised $750 million and has a billion and a half on its balance sheet, meaning that

it's operationally run incredibly well.

And then there's this,

I think it's called the score or the SaaS score.

I forget what it's called, but essentially you add or the rule of 40, you add the growth rate

plus the profitability of the operating margins.

And if it's above 40, you have a great SaaS company.

This company is trading at 64, which puts it

five in the top 5% of all SaaS companies.

And then I always used to evaluate at the end of the year, L2's metrics, my subscription-based analytics company, based on logo renewal and dollar renewal, or what they call net retention.

And the net retention or the dollar renewal at Figma is 134%,

meaning that if a customer is spending $100

on Figma the next year and you take out people who don't renew, on average, they're spending $134 or or $34 more per year.

The metrics on this thing are just incredibly strong.

It's in a category that's growing.

The metaphor I would use is that it's open AI to search.

And that is, I think Adobe is going to be just fine.

It's still the market leader, a little bit overengineered.

And the AI or the open AI is Sigma coming in with kind of a more, I don't know, collaborative.

That's what they're sort of known for.

They're really good at collaboration.

80% of the Fortune 2000 are using the product.

I think this, and I want you to talk about this, I think this is the, every year we pick an IPO.

Last year we picked Reddit, the year before Eliminate, the year before Airbnb.

This is my pick for IPO of the year.

I think this thing is going to scream out of the gates.

Yeah, I'm 100% with you.

I think we're looking at the IPO of the year, and we'll see throughout the day.

Any prediction, I mean, it sounds like you think the stock is going to see a massive pop.

Is that right?

So managements have learned that an IPO is not only a fundraising event, but a branding event.

And

they're willing to price it below the market.

I have, as I referenced before, I've been calling around trying to find shares.

I can't find them.

And the most recent number I've heard is that this IPO, a good IPO is usually 12 times oversubscribed.

People put in an order for a million dollars thinking they'll get clipped back.

And so it's 12x oversubscribed.

The latest number I heard is this, this thing is 40x oversubscribed.

So I think this spring has wound so tight.

And for people who are fortunate enough to get into this IPO, I think you could see, and it's dangerous to put numbers on it.

I think this thing could explode.

I think this is

the biggest IPO of what I'll call a real company, not a fashionable crypto company, since a Reddit or an Airbnb.

Yeah, I think

my prediction here is this thing is up dramatically on the first trade.

What are your thoughts?

What do you think is going to happen here?

Massive pop, huge pop, no question about it.

I mean, there's the demand that we're seeing, as you say, 40 times oversubscribed.

I love that anecdote that you tried.

I mean, if anyone should be able to get in to the latest tech IPO, it's you.

So the fact that

you give the most, my brother.

Goldman and Jay.

If they only cared what Ed Elson thought, I should absolutely have been in this IPO.

But now they want to go with people like Black Rock and Blackstone.

The fact that you give Goldman a call, and not only is the answer no, but he knows what the question is.

That's what I'm calling.

That to me tells me that the demand is just through the roof on this thing.

So that's the demand side of it.

But then you can also just look at the fundamentals of it.

Just think about a couple of years ago when we were discussing the acquisition of this company by Adobe.

And Adobe wanted to buy the company for $20 billion.

And, you know, we talked about that at the time, didn't go through because the EU antitrust division didn't let them, which, by the way, is a great thing for retail investors.

And that's another talk track.

But $20 billion back in 2023, I believe.

And since then, revenue's gone from $500 million to $820 million.

And yet the company is being priced below the acquisition price.

We're looking at less than $19 billion for this thing.

So both on a fundamentals level and in terms of the hype and demand, I think you're going to see a huge pop.

We'll see.

I hope we don't get proven wrong, but that would be my guess.

Yeah, but the observation here, other than a desperate professor

trying to find shares in a hot IPO, is

the learning here is that regulation and antitrust are really important.

And there's a certain trope fomented by the far right.

and by incumbents that, oh, no, you don't need antitrust.

Let your thoroughbreds run and acquire companies.

I believe the acquisition offer was late late 2022, and it was valuing the company at 50 times revenues.

Now, investors, if you can get in on this, are going to be able to buy the company for 16 to 20 times.

And so, investors win here.

Investors have an opportunity to invest in a company that's growing faster, that it's a disruptor, and they get access to a different stock to diversify in the space of design as opposed to just piling into Adobe, which is a great company.

Let's talk about clients.

Now, organizations, corporations have a second competitor that they can negotiate with, which forces Adobe.

Adobe Express is much more collaborative.

The reason why they're much more collaborative and they've invested a shit ton of money in RD to become more collaborative is they feel Sigma nipping at their heels.

Sigma, what's so interesting about this is Figma got a billion-dollar breakup fee.

They took $750 million of that, imported into R D in

2024.

So you saw R D spending go up.

Employees win.

Typically, when a company is acquired, 18% of the people at the acquired company end up leaving.

In an IGO, you end up with hiring of 23%.

So it's an increase in employment.

So clients, corporations win because there's more competition, which means people have to come up with better products at a lower price, i.e., innovation.

Investors win because they have another opportunity to diversify and invest in a pure play that's growing faster.

And the employment market wins,

more tax revenue.

I mean, this is just, this is why competition is so important.

And the lesson here is that good regulation matters and it works.

And what's most interesting, I find, about this whole thing, is that it wasn't our FTC or DOJ that created a great independent company and competitor that grows the economy.

It was EU regulators.

And that is the FTC and the DOJ in what can best be described as a deep slumber of antitrust in the United States

was going to let this go through.

And then the EU said, sorry, girlfriend, we're going to let this go through.

And because they wouldn't let it go through, the deal didn't go through.

And here we are with an opportunity to invest in a company at 18 times revenues as opposed to 50 times revenues.

So EU.

Remember what people said.

People said, oh, the EU is suppressing innovation.

Meanwhile, Adobe invests more in R D.

You see massive AI investment from Figma.

And now you get to invest in this company and you don't have to.

I mean, now you can get some real exposure to this versus, again, as you said, piling into Adobe and that would have been your option otherwise.

Yeah.

And look, this is a case study in that good regulation and competition create economic growth and wins across our tax base, employee base, and give people better products at a lower price.

Yeah.

So let's take a guess.

So I'm comfortable saying that this is Crof Gene Markets IPO of 2025, unless something else blows our stocks off.

We're excited about this one.

Let's take a guess.

First trade, what do you think it's up from the pricing?

I'm going to go 30, 30% up.

Yeah, that sounds right.

I'm going to go.

What do you think?

I'm going to go

40 or 50.

I think the spring is wound so tight here.

There's been such a not only is the mark, is there a dearth of IPOs, as you have pointed out, there's a dearth of great companies going public that aren't fashionable, not just shit post on circle, but it's fashion.

Crypto is fashionable right now.

This is not fashionable.

This is just a great company with great underlying fundamentals that can sort of justify, you know, a

bubble market valuation.

So I'm going to take the over-under here and I'm going to go that I think it's going to be higher than 30%.

I think at some point during the day, it'll be up 40 or 50% or more.

This feels very Airbnb-ish to me.

Watch the stock tank.

There we go.

There we go.

Property markets.

Good.

Remember

the inverse index.

Yeah.

There you go.

Well, now I'm really praying for a stock pop.

Thank you for your time, Scott.

Thanks, brother.

Good to see you.

Good to see you.

Bye-bye.

After the break, a look at the Fed's interest rate decision.

Stay with us.

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The Federal Reserve held interest rates steady for its fifth straight meeting.

However, two Fed governors pushed for an immediate quarter point rate cut.

That is the first time since 1993 where more than one Fed governor has dissented.

Well, first off, we're going to take a victory lap.

Back in May, when most of Wall Street agreed that we would get a rate cut in July, I took the other side of that bet.

I predicted we would not get a July rate cut.

I predicted that the earliest time we would see rates come down would be September.

The expectations for a rate cut, which most traders believe will happen in July, that actually came down a little bit.

There was an 80% probability of a rate cut coming in July, and that came down to 70%.

So

the net net is there is less of an expectation that we will get rate cuts soon in the summer.

It's still sort of a high probability.

They think 70%.

That's what the markets believe.

I'm going to take the other side of this.

The vibe I got here was that Powell is extremely cautious.

He said the words wait and see 11 times in the press conference.

And I think what he's doing is he's clearly waiting to get the data.

He wants to see what is the actual impact of these tariffs.

And we haven't seen that yet.

So my prediction after this press conference, I think we're not going to see a rate cut until September because I think Jerome Powell is waiting for more data.

Specifically, I think he wants to see the Q2 GDP report.

And that's not going to come out until the end of July.

And my view is only then will he decide that he has enough data to actually make a decision, which would mean that the next time that he could potentially cut rates, if that's all true, would be September.

Could be possibly even later.

But my prediction, this isn't going to happen.

We're not going to get any cuts until September at least.

So there you have it.

No rate cut.

We're still at a target rate of 4.25 to 4.5%.

percent and according to jerome powell the fed has quote made no decisions about whether to cut rates in september now why did he hold rates steady well as i said before i think jerome powell wanted more data he wanted more information because as we've discussed many times on the show if you implement a tariff in april you're not going to see the economic impact until sometime in the late summer or in the fall because it just takes a while for the cost of the tariffs to funnel through.

So if you were to cut rates in July, you would essentially be making a decision based on zero relevant information.

And as we know, Jerome Powell likes to make informed decisions.

He likes to see the data and then decide.

And so that's why a rate cut wouldn't make sense here.

Now, the question then becomes, when will Jerome Powell decide that he is adequately informed?

And that is an important question, because as we also saw yesterday, the GDP data for the second quarter just came out and it looked pretty good.

GDP grew 3%, which reversed the contraction we saw in the previous quarter and it also blew past expectations.

So does that mean then that Jerome Powell now has his evidence?

Does he have proof that America is doing well and that tariffs are no problem?

Well,

Probably not, because unfortunately, the reality of this GDP report is is that it is just as noisy and misleading as the last one.

You might remember in Q1, GDP fell 0.5%.

And a lot of people were quick to say, look, the economy is doing badly.

But as we discussed, that number was actually quite misleading.

It was in reality a byproduct of this wild swing in our trade balance, where businesses imported tons of new products in anticipation of the tariffs, which had this distorting effect on the GDP.

Without getting too into the weeds, imports are a tricky thing to measure.

They're technically subtracted from GDP in the GDP equation, but they're supposed to be accounted for in our measures of consumption and inventories.

The trouble is the government just doesn't have a great way of measuring inventories.

They have to rely on estimates, which is why we saw this huge mismatch in the data last quarter, which made things look way worse than they actually were.

So it wasn't that the economy actually declined 0.5%.

It's that the volatility in trade made the data extremely noisy and as a result, unhelpful.

And that's why you're likely to see some serious revisions to that data in the coming months.

So with this GDP report, the same thing is happening, but flipped.

Tariffs have been implemented and imports have dramatically declined.

So now we have the same mismatch, but in the other direction.

And that's why GDP grew so sharply.

Now, why does any of this matter?

Well, because the question is whether or not Jerome Powell is going to look at this GDP data and decide, yes, I should cut rates.

And the answer to that question is almost certainly no.

The data is way too noisy and it doesn't really tell him anything.

He needs to see something else.

Specifically, data that tells him the story of what tariffs are doing to prices.

Because remember, that is what this is all about.

It's all about inflation.

So yes, he might cut rates in September.

The markets are saying 50-50.

I'm pretty skeptical.

But if he does, it won't be because of this report.

It'll be because of the inflation data, most likely the PCE data, which is set to come out today.

But even if that's good, it's highly possible he'll look at it and conclude, actually, this still doesn't tell me the story of tariffs.

Because as we've seen, The pass-through is taking a really long time to show up.

And it takes even longer when your tariff policy is changing every five minutes.

That's the story we're hearing in earnings this week.

All of these companies saying we haven't raised prices yet because we still don't really know what the tariff situation is, but the plan is to raise them.

So is that story going to be told in this month's inflation data?

No, it won't.

So in sum, we're still not in a place that is all that different from where we were three months ago.

The data still isn't telling us much.

And if we believe that Jerome Powell will only cut rates once he knows what the data is telling him, once he knows what the real story of tariffs is, then I think if we were to place bets, we would have to bet that he won't cut rates next month.

Once again, it's a toss-up.

The markets are split on this.

But given what I think I know about the guy, and given what I think I know about the way he makes decisions, I don't think he's going to cut them.

A high-profile deal between a tech giant and a media heavyweight finally has a price tag.

Amazon will pay the New York Times between 20 and 25 million dollars per year to license its content.

The deal allows Amazon to train its AI models on content from the Times and feature excerpts across its products.

That means that Alexa can now respond to your questions using Times reporting.

Okay, so this is the latest in this AI content licensing story that we've watched unfold over the past couple of years.

As you probably already know, a lot of these AI chatbots have been scraping data from books and journals and newspapers, basically anyone who makes content.

And the people who make that content have understandably wanted to get compensated.

And it's been a struggle.

We've seen multiple lawsuits filed against the AI companies.

We've seen actors and authors and journalists all coming together to say, hey, stop stealing our stuff.

And then we've also seen some deals made.

The Financial Times, for example, struck a deal with OpenAI last year.

So did News Corp.

Reuters struck a deal with multiple AI companies.

But this is the very first AI deal we've seen out of the New York Times.

And the way that this deal has been presented, at least in the media, is that it is a big win for them.

According to the Wall Street Journal, the deal is a quote meaty payday for the New York Times.

According to The Verge, a big price tag.

According to LinkedIn News, a mega content deal.

And you know, maybe it is for the New York Times.

But I do think it's worth zooming out to consider what this means for the other party in this transaction, what this means for Amazon.

For context, Amazon raked in $640 billion in revenue in 2024.

AWS alone did more than 100 billion.

This deal is worth $20 million,

which means that for Amazon, it is equivalent to two months of revenue from one single client in the AWS division.

And so you do have to ask yourself, is this really a big price tag?

Did the New York Times actually win here?

Well, you could certainly make the argument that they did.

Again, $20 million for the New York Times is maybe maybe a good amount of money.

It's about 1% of its revenues.

But even if that seems good to you, you still have to think big picture here.

You have to consider what these AI companies would be worth if the data they use to train their models didn't exist.

And the answer is zero.

These AI companies could not survive if they didn't have access to the content that lives across the internet.

And that isn't to say that a company like OpenAI couldn't survive without the New York Times.

But it is to say that OpenAI couldn't survive if the New York Times had banded together with every other publisher in America and they all said in unison, no, you cannot access our content unless you pay us.

That, right there, is the difference between a valuation of $300 billion and a valuation of zero.

And so you have to ask, what would that contract be worth?

Would it be hundreds of millions?

Would it be billions?

Would it be hundreds of billions?

I don't know.

But I'm pretty sure that whatever it would be, it would make a $20 million contract look like peanuts.

I don't know for sure, but that would be my guess.

So sure, the New York Times had a meaty payday.

But if the New York Times were serious about this, a meaty payday would not cut it.

If the New York Times were serious, they'd be thinking of ways to double, triple, quadruple its market cap.

That's what's at stake here.

And once again, despite the flashy headlines, the markets told us the real story here.

The New York Times stock initially jumped on the news about 4%,

but by market close, that had completely reversed and the stock ended down 1%.

Put another way, 20 million in revenue gained, 100 million in market cap lost.

So this wasn't a win for the New York Times.

This was an opportunity that they decided to miss.

Okay, that's it for today.

Thanks for listening to Prof G Markets from the Vox Media Podcast Network.

I'm Ed Elson.

Join us tomorrow for our conversation with Kevin Gordon, director and senior investment strategist at Charles Schwab.

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