Those include the recent cease-and-desist letters sent by Figure AI to brokers running their own secondary marketplaces without Figure’s approval. The issuer is making this move to ensure it continues to have control over its stock price and valuation. This decision follows on the heels of its recently announced $1.5 billion funding round, bringing its valuation up to a staggering $39.5 billion.
Those letters were sent shortly after Bloomberg published a story about Figure AI’s grand aspirations for a $1 billion capital raise. At a $40 billion valuation, it would be a mind-boggling 15 times the company’s last $2.6 billion valuation from February 2024. Consequently, current shareholders want to sell their shares. The majority of them want to sell their shares at a lower than anticipated price.
Brett Adcock, the founder of Figure AI, emphasized that the company is currently the “most sought-after private stock in the secondary market.” This assertion is a testament to how hot Figure AI’s stock is – and that’s due, in large part, to its fast-growing valuation. However, the unlicensed trading of these shares has pushed Figure AI to make a move.
In a statement provided by company spokesperson, a Figure representative said that the company discovered the use of an unauthorized third-party broker to market Figure shares without the Board of Director’s approval this year. In response, the company issued a cease and desist letter, similar to their response in the past against other unauthorized brokers. That shows that Figure AI has a long track record of going to great lengths to protect its turf.
In a written statement shared with TechCrunch, Figure AI doubled down on the importance of secondary market trading. The company called these allegations unfounded and claimed that it prohibits short selling of its shares absent express approval from its board. It reiterated its pledge to defend itself from predatory, third-party brokers in the marketplace.
Sim Desai, founder and CEO of Hiive, offered an interesting counterpoint on the effect of secondary market trading cross-posted. He contended that by allowing for some active trading they would attract more interest in the primary shares on upcoming funding rounds. Desai continued, “When someone can’t sell something, it’s almost always a question of price and valuation, rather than a lack of available capital. His comments suggest that current shareholders are in for a tough ride. These challenges are probably due more to market perceptions than actual obstacles to selling the units.
This looming threat represents a major shift occurring within the industry. Companies tend to limit or prohibit direct secondary sales, fearing that would create a competitive or zero-sum environment. Legitimate companies like Figure AI may restrict trading to avoid tanking their own valuations. This strategy allows them to stave off future devaluation of their shares.
So Figure AI is moving full steam ahead with its funding aims. It remains vigilant to continue to oversee and regulate the trading of its equities in secondary markets. These continuing changes will almost certainly affect investor sentiment as well as the broader environment surrounding trading in private stocks.
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