🖇️ About That Adobe - Figma Thing - part two

First Up ... This Pile of Drivel - from The Information - an organization that should know better.

What would European bureaucrats do without an active U.S. tech industry to bother? On Monday, for instance, Adobe and Figma called off their $20 billion deal in the face of European regulatory opposition. The deal would have led “to higher prices, reduced quality or less choice for customers,” claimed European regulatory czar Margrethe Vestager in a triumphant statement. But that wasn’t all. The Europeans also opened a formal investigation into whether Elon Musk’s X, formerly known as Twitter, has breached the Digital Services Act by (among other things) not doing enough to stop the “dissemination of illegal content”—such as hate speech—on the platform.

Neither of these latest moves is good for tech—or for competition.

As my colleagues Cory Weinberg and Maria Heeter noted today in this report;

killing the Figma deal will have a chilling effect on venture capital investment in startups, reinforcing the perception that one of the main exit ramps for startups and their backers is barred. The long-term effect therefore may be bad for competition, which is the opposite of what the Europeans intended. As for the X inquiry, the Europeans are trying to bring down a sledgehammer on a problem—how to curtail the spread of offensive speech—that requires more delicate handling. Musk’s approach to contentious speech (his own comments in particular) may not be perfect. But can anyone name a platform that has got it right?

The good news is that neither Adobe nor Figma, at least, may suffer too much. As my colleagues wrote today, Figma’s business has continued to grow quickly even through the past year. Early employees will be upset that the chances of a rich payday have disappeared, at least for the moment. But the company is in good shape financially—particularly with the billion-dollar breakup fee it is getting from Adobe —and surely can afford a stock buyback to give some of those workers some liquidity. And assuming Figma’s business stays strong, an IPO should be in the cards before too long.

As for Adobe, it may well be better off not having to follow through on what was a ridiculously overpriced deal. At the time the buyout was announced, in September 2022, the price translated to 50 times Figma’s forward revenue (based on annual recurring revenue, which isn’t quite the same). Investors weren’t impressed: Adobe’s stock dropped 19% in the days after the deal’s announcement. Still, the growing regulatory issues apparently comforted investors that the deal wouldn’t go through, as Adobe shares began rallying in late 2022 and are now 61% higher than where they were immediately before the company unveiled the Figma acquisition. That includes a 2.5% lift today. So Adobe shareholders are happy—and given enough time, Figma’s shareholders may be too. As for X, the investigation will take a while. Who knows what state X will be in by the time the Europeans finish?

... words primarily penned by Martin Peers