Shopify fires back after attack by U.S.-based short-seller
‘Vigorously defend our business model’
GEOFF ZOCHODNE
Shopify Inc. fired back Thursday after being accused by a U.S.-based short-seller of promoting a “get rich quick” scheme.
“We vigorously defend our business model and stand resolutely behind our mission and the success of our merchants,” said Shopify in a statement.
The Ottawa-based e-commerce company was responding to allegations levelled by Citron Research, which accused Shopify in a report Wednesday of being “the promoter of the hottest new ‘get rich quick’ scheme on the internet.”
Shopify’s stock dropped 11.5 per cent on the Toronto Stock Exchange after the release of the report and the publication of a video featuring Citron managing editor Andrew Left, who highlighted YouTube videos referencing the “Shopify millionaire” and touting the company’s websites. The stock was trading 3.3 per cent lower to $124.5 on the Toronto Stock Exchange in mid-morning trading on Thursday.
“They’re not selling them to business owners, they’re selling them to people as opportunities to get rich quick,” said Left in the video. Both he and the report likened Shopify to Herbalife Ltd., which agreed in 2016 to restructure its business and pay $200 million to settle allegations made against it by the Federal Trade Commission (FTC).
According to a FTC press release dated July 2016, the agency had accused Herbalife of having “deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products.” The settlement with the FTC prohibited Herbalife from claiming that its members could “‘quit their job’ or otherwise enjoy a lavish lifestyle.”
Citron noted Shopify had posted on its Facebook page that “2,700 people become millionaires each day,” and said there were 92 mentions of the word “millionaire” on Shopify’s website.
Brian Belski, chief investment strategist at BMO Capital Markets, told BNN Wednesday that he had been asked about a month ago why he didn’t own Shopify, and said it was because “I don’t understand the company.”
“We like to buy companies that we understand,” Belski added. “I believe that we’re heading into a period of investing that you want to own transparent assets. I just don’t know how they make money. I don’t understand the model.”
Shopify offers online stores, point-of-sale systems, and support services to merchants.
National Bank Financial analyst Richard Tse wrote in a report Wednesday that the risk to Shopify’s financials was with “transient subscribers who do not represent a meaningful portion of value for Shopify.”
“In our view, we can’t unequivocally rule out that this negative report will not surface some regulatory scrutiny even if we think it’s remote,” wrote Tse.
“In the short-term, there’s little doubt it will weigh on the stock despite what we believe to be an unchanged fundamental outlook.”
Tse also said that the situation could “open a window” for investors who may have missed out on the steady rise of Shopify shares, which had surged more than 284 per cent since their 2015 debut, and were up more than 133 per cent this year alone before Citron’s allegations.
Shopify said in its statement that it is “committed” to fighting against the decline of entrepreneurship.
“Shopify’s growing community of entrepreneurs includes makers, creators and innovators, from students trying to pay for school to merchants who have successfully scaled their businesses,” the statement said.
The company said that every 90 seconds a store using Shopify makes its first sale, that over 131 million consumers have made purchases at a store using Shopify over the past year, and that stores using Shopify generated $10.7 billion in gross merchandise volume in the first six months of 2017.
“Shopify has always strived to take the path that leads to more entrepreneurs by designing its platform to remove the technical, operational, and financial barriers to enable anyone, anywhere, to build, grow, and scale a business,” the company added.
Meanwhile, at least one law firm, California-based Girard Gibbs LLP, has said they are investigating the claims.
TORONTO — A new report from RBC Capital Markets highlights the increasing dominance of Canadian pension funds in the real estate sector globally.
The position of pension funds, which own such Canadian real estate landmarks as the Yorkdale Shopping Centre and the TD Centre in Toronto, continues to grow and the top 24 Canadian pension funds now own $188 billion of real estate, according to RBC analysts Neil Downey and Michael Smith.
Allocation of real estate now amounts to 13 per cent of the total investments of $1.5 trillion at those funds.
“Real estate allocation targets have continued to creep higher, and we believe they may reach 14 per cent to 16 per cent over the next five years,” the pair write in a report to clients. “Canadian pension plans are a major force in the domestic investment property market. Over the past two decades, the biggest plans have had a growing influence on direct property investment around the globe.”
Downey and Smith say the pension fund liabilities have been dramatically affected over time by historically low real interest rates, changing demographics, higher life expectancy and longer retirements and the fact that some plans are maturing to the point whereby their tolerance for volatility or risk is likely diminishing.
“(Pension funds have) some genuine competitive advantages, including a typically constant and predictable stream of contribution inflows for many years to come, and the ability to invest for the long term,” they write.
Those plans are aggressively turning to real estate. Between 2004 and 2016, total plan net assets grew to $1.5 trillion from $485 billion, a long-term compound annual growth rate of just under 10 per cent. During the same period property investments jumped to $188 billion in 2016 from $32 billion in
RBC Capital Markets report
2004, a compound annual growth rate of about 16 per cent.
“With the growth rate of real property investments dramatically outpacing growth in total plan assets, the results has been a longterm trend towards higher real property allocations. More specifically, the collective allocation to real property for the 24 funds has increased from 6.6 per cent in 2004 to 12.9 per cent in 2016,” Downey and Smith write.
The aggregate target allocation of those 24 plans was actually 13.3 per cent, so they are still about $5 billion under-allocated to real property.
The report notes that over time pension funds are increasing allocation to real estate – it jumped 365 basis points in the last 10 years, or from 9.7 per cent to the current 13.3 per cent.
“Even in the past three years this target investment allocation has continued to ‘creep’ higher by approximately 100 basis points,” they say. “We expect the upward trend in target allocations will continue, albeit at a slow pace, to somewhere in the 14 per cent to 16 per cent range over the next five years.”
The gains in real estate allocation compares with a decline in pension fund exposure to listed equities. Investments in listed equities have increased from $297 billion in 2006 to $551 billion in 2016 but their allocation has declined by about 740 basis points, from 45.2 per cent in 2006 to 37.8 per cent in 2016.
“Much of the growth in real estate and infrastructure investments has come at the expense of growth in listed equities,” says the report.