Shopify CEO calls short-seller's claims 'preposterous'


READ MORE

Shopify Inc.’s strong third-quarter earnings report and the CEO’s defence against “preposterous claims” by a “short-selling troll” did little to ease investor concerns as shares tumbled more than eight per cent.


The company posted its first adjusted operating profit as a public company in the quarter ended Sept. 30 — a quarter earlier than anticipated — and CEO Tobias Lutke publicly addressed allegations made earlier this month by high-profile short-seller Andrew Left of Citron Research that sent shares falling on the Toronto and New York stock exchanges.


Despite this, the company’s shares slipped by more than 8.5 per cent to close at $128.26 on the Toronto Stock Exchange on Tuesday.


Lutke attempted to ease concerns on a call with analysts during which he had promised to address Left’s criticism of the company’s business model in a video published earlier this month.


“This is going to be a fun one,” Lutke said at the start of the call, explaining the company waited this long to address the allegations because it does not engage in short-term stock management and reserves this time each quarter for such activities.


On Oct. 4, Left published a video alleging the company, which provides businesses with online checkout services, doesn’t comply with Federal Trade Commission guidelines and suggesting the stock’s value is closer to $60 US before any potential FTC involvement.



He compared the company’s practices, which he called a “good ol’ get-rich-quick scheme,” to Herbalife. Left alleged Shopify’s partners recruit merchants by wooing them with promises of self-employment and million-dollar incomes.


During the call, the CEO asserted the company sells an e-commerce platform — not business opportunities.


Shopify complies with FTC regulations, Lutke said, and much of their content shows how hard — rather than easy — entrepreneurship is.


“Implying that these businesses are somehow illegitimate is an insult to their hard work,” he said.


The company makes most of its revenue from merchants successfully selling through their online shops, he added.




Harley Finkelstein, the company’s chief operating officer, said Shopify has a team that approves individual affiliate partners who sign an agreement outlining their disclosure responsibilities.


“Those that don’t comply we simply kick out of the program.” He said some of the alleged affiliates Left’s report alluded to are not partnered with Shopify.


Lutke said Shopify consulted with outside legal counsel, who also believe the claims are unsubstantiated, and has not been contacted by the FTC.


Citron ‘unimpressed’


Citron Research responded Tuesday, saying Shopify’s platform is effective for small and medium-sized businesses to launch e-commerce platforms.


“We never doubted they have good software for accomplishing this task,” Citron said.


“That being said, we were unimpressed by the company’s response to Citron’s conclusion that Shopify sells business opportunities through affiliate marketers, and they depend on affiliate marketing to drive their growth metrics.”


Shares in Shopify came under pressure after Left published his initial criticism, falling more than 10 per cent on the TSE the day Left published his report. The shares have since regained some of the ground they lost, but continued to drop Tuesday.


Revenues up


The company, which keeps its books in U.S. dollars, said it lost $9.4 million in its third quarter as its revenue grew 72 per cent compared with the same period last year.


Its loss for the quarter amounted to nine cents per share compared with a loss of $9.1 million, or 11 cents per share, a year ago when it had fewer shares outstanding.


On an adjusted basis, Shopify said it earned $5 million, or five cents per share, for the quarter, compared with an adjusted loss of $1.8 million, or two cents per share, for the third quarter of 2016.


Revenue totalled $171.5 million, up from $99.6 million.


The increase came as its subscription solutions revenue grew to $82.4 million US compared with $49.8 million US a year ago, while merchant solutions revenue climbed to $89 million US, up from $49.7 million US.

Comments

Post a Comment

Popular posts from this blog

Canadian expected to be aboard Russia's 1st manned space mission since rocket failure

READ MORE The first manned mission to the International Space Station since a Russian rocket failed to launch successfully earlier this month may take off on Dec. 3, space agency Roscosmos said on Wednesday. And the crew is expected to include Canadian astronaut David Saint-Jacques, Agence France-Press reported. A Russian cosmonaut and U.S. astronaut were forced to abort their mission on Oct. 11 and perform an emergency landing after a launch accident that Roscomos said was caused by a faulty sensor. The accident was the first serious launch problem experienced by a manned Soyuz space mission since 1983, when a crew narrowly escaped before a launch pad explosion. Sergei Krikalyov, a senior Roscosmos official, was quoted by state news agency Tass as saying the next manned launch had been planned for mid-December, but that Russia was trying to bring the date forward so that the ISS is not briefly left without a crew. “The industry is making significant efforts to move the launch t...
Read more

Getting the dope on pot stocks is becoming easier as media groups invest in content: Don Pittis

Image
READ MORE “What’s the buzz? Tell me what’s happening,” goes the ’70s rock anthem. Part of the catchiness of the lyric — from the rock musical Jesus Christ Superstar  — was that in that era the term “buzz” had developed a second spicy meaning. It described the high that people got from smoking cannabis. In the 1970s, the magazine High Times was a brand new title keeping an eye on the illegal but growing business of marijuana pricing and sales. It ran centrefolds of glistening pot plants and of an apartment filled to the windows with what the magazine insisted was an entire ton of cannabis. Now some of Canada’s most staid media voices are looking for ways to go toe to toe with High Times and its U.S. competitors, hoping to profit from Canada’s global head start in legal recreational cannabis. But when it comes to making a killing from spreading the buzz on the cannabis biz, to q...
Read more

Toronto man denies conspiring with Marvel CEO in alleged hate mail scheme

Image
READ MORE A Toronto man accused of conspiring with the head of Marvel Entertainment in a bizarre hate mail campaign against his wealthy former employer has denied any role in the alleged scheme. David Smith, along with Marvel CEO Isaac (Ike) Perlmutter, is the target of a slander lawsuit launched earlier this year by Canadian businessman Harold Peerenboom. Now Smith — a former employee of Peerenboom’s Toronto-based executive search firm, Mandrake Management — has filed a motion to dismiss the U.S. civil suit. It’s the latest development in the years-long legal battle between Peerenboom and Perlmutter, a notoriously reclusive American billionaire and personal friend of U.S. President Donald Trump. The hate mail campaign, which ran   between 2012 to 2015, saw anonymous letters falsely accusing Peerenboom of being a child molester, murderer and anti-Semite...
Read more