Why Shopify Stock Dropped

Motley Fool'2021-02-24

The e-commerce leader is raising cash to fend off intensifying competition.

What happened

Shares of Shopify(NYSE:SHOP) fell 6% on Tuesday after the online retail platform announced a public stock offering.

So what

Shopify will sell 1.18 million shares to investor sat a price of $1,315 per share. The sale price was set approximately 5% below Shopify's closing price on Monday, and its shares fell in kind.

The e-commerce company expects to raise roughly $1.5 billion from the stock sale. Shopify intends to use the proceeds to bolster its balance sheet and fund its growth initiatives. The offering is expected to close on Feb. 25.

Now what

It will be interesting to see how Shopify deploys its newfound cash. E-commerce juggernaut Amazon.com(NASDAQ:AMZN) recently acquired Selz, a company that helps businesses launch their own online stores. The move suggests Amazon may be planning to compete more directly with Shopify.

Online store creation is an area that Amazon ceded to Shopify back in 2015. But after watching Shopify grow at a torrid clip since then, Amazon is likely regretting that decision.

Shopify may be raising capital as a pre-emptive move. The cash could allow it to make an acquisition of its own, as a means to strengthen its defenses against Amazon's potential advances.

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Comments

  • Ben0619
    2021-02-25
    Ben0619
    [微笑] 
  • Shifeng
    2021-02-25
    Shifeng
    Because the set up is easy to replicate, the moat is shallow. 
  • bbarbanida
    2021-02-24
    bbarbanida
    Commented but didn't get the coin
  • Buylowlow
    2021-02-24
    Buylowlow
    Why I leave so many comments still cannot get the coin 
  • Puspa
    2021-02-24
    Puspa
    Wow
  • Jinyuan
    2021-02-24
    Jinyuan
    Healthy competition 
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