Shopify not on sale very long

Shares in Ottawa tech darling slump before recovering

Shopify Inc.’s shares plunged nearly nine per cent early Monday to an 18-month low, as the Canadian e-commerce giant faces the brunt of a global tech selloff.

The slump mirrored Canada’s main stock index, which fell to a three-month low, tracking losses in global equities on growing tensions between Russia and Ukraine and ahead of major central bank meetings this week.

In the United States, losses have deepened for the techheavy Nasdaq index as investor fears of a rise in Treasury yields amid concerns the Federal Reserve would take steps to control inflation hit tech and growth shares.

Shares of Shopify, which was once Canada’s most valuable company, rose over 20 per cent last year and 178 per cent in 2020, largely helped by a broader adaptation to e-commerce as retailers, food brands and other mom-andpop businesses shifted their businesses online and became reliant on its services.

So far in 2022, Shopfiy is down 40 per cent. On Monday, shares initially fell to $1,007.4, their lowest since June 2020.

Shopify is reportedly terminating or reducing contracts with warehouses and fulfillment partners, which could reduce its capacity to ship orders from merchants.

“Shopify is nowhere close to building a type of fulfillment operation at the scale of Amazon, and investors should not expect anything like that in the near term,” said Wedbush analyst Ygal Arounian.

The changes could mean big investments into Shopify’s fulfillment network and moving from a capital-light model to owning distribution centres, something investors will likely question in the current market environment, Arounian added.

Shopify later said it had communicated plans with warehouse partners and merchants and that capacity would not be reduced.

“We will be making changes to (the Shopify fulfillment network) to help merchants compete with big-box retailers, such as prioritizing two-day shipping at affordable prices and access to easy returns for U.S. shoppers,” the company said in a statement.

That news helped shares reverse course by mid-afternoon to trade up about three per cent to about $1,149.