Figure AI Sends Cease-and-Desist Letters to Brokers

Figure AI and Secondary Market Stock Sales

Brett Adcock, the founder of robotics company Figure AI, recently asserted via a post on X (formerly Twitter) that his firm is currently the most in-demand private stock on the secondary market.

However, it has come to light that Figure AI has dispatched cease-and-desist notices to at least two brokerage firms operating secondary marketplaces, as confirmed by those brokers to TechCrunch.

These brokers reported that the cease-and-desist letters from Figure AI specifically requested the cessation of marketing activities related to the company’s stock.

Valuation and Cease-and-Desist Actions

Both brokerage firms indicated they received these letters following a Bloomberg report in mid-February. The report detailed Figure AI’s pursuit of a $1.5 billion funding round, potentially valuing the company at $39.5 billion. This represents a substantial increase – fifteen times its valuation of $2.6 billion from February 2024.

A representative from Figure AI explained to TechCrunch that the company routinely issues such letters when brokers market its shares without explicit authorization. This suggests a consistent practice of addressing unauthorized stock sales.

“When an unauthorized third-party broker was found to be marketing Figure shares without the approval of the Board of Directors, the company issued a cease and desist order, consistent with past actions taken against other unauthorized brokers,” the spokesperson stated in a written communication. “We do not permit secondary market trading of our shares without board approval and will continue to safeguard against unwanted third-party brokers.”

Restrictions on Private Stock Sales

As Figure AI is a privately held company, its stock is not freely tradable by investors, especially without a company-sanctioned event. This limitation is the primary reason secondary markets have emerged, offering investors avenues to access capital from their shares prior to a potential IPO.

These markets may provide options like loans secured by startup shares, which are repaid upon the company’s public offering.

Concerns Regarding Valuation and Secondary Sales

The secondary marketplaces that received the cease-and-desist letters have proposed alternative explanations for why some CEOs may object to share sales on their platforms.

Brokers suggest that existing shareholders were attempting to sell their stock at a price lower than the anticipated $39.5 billion valuation. Both brokers conveyed that companies often resist the possibility of discounted secondary shares competing with a new funding round.

Sim Desai, founder and CEO of Hiive, a secondary shares marketplace, stated to TechCrunch – without directly referencing Figure AI’s situation – that companies sometimes view secondary sales as a “zero-sum game.”

Desai argues that the opposite could be true, asserting that an active secondary market could actually generate greater interest in a new primary share offering.

The Role of Valuation

However, Desai also pointed out that if secondary market activity doesn't stimulate interest in the primary round, the issue likely stems from the valuation itself. “If there’s difficulty in selling an asset, it’s usually a matter of price and valuation, not a lack of available capital,” he explained.

Recent Press and Potential Legal Action

Figure AI has also been the focus of several recent news reports detailing the company’s advancements with its key client, BMW. In at least one instance, Figure AI responded by claiming the article contained numerous inaccuracies and threatened legal action.

The ultimate amount of funding Figure AI secures – and at what valuation – remains uncertain. Similarly, whether existing investors will have the opportunity to realize early returns through secondary transactions is yet to be determined.