Shares of Shopify Inc (NYSE:SHOP) tumbled Thursday after famed short-seller Andrew Left of Citron Research went bearish and urged investors to short the Canadian e-commerce company.
In a research note, Left and his team make the case that their newly-adopted short position stems from a “perfect storm” of business setbacks that will knock Shopify “off its high wire to $100 in the next 12 months.”
Growing fearful about Left’s predictions, investors sent Shopify shares down 6% to $192.75 in afternoon trade.
In the past month, Citron says a lot has changed for Shopify as Square Inc (NYSE:SQ) announced it is revamping its online store; Mailchimp ended its partnership with the e-commerce site; and news surfaced that Microsoft (NASDAQ:MSFT) is launching a competitive offering to Shopify.
“Just when the business seemed unstoppable, the obvious change in narrative for this market darling will soon cause it to fall victim to the forces of gravity from its stratospheric valuation – which was based on no competition, no regulatory risk, and flawless execution,” wrote Left and his Citron team.
Another blow to Shopify’s business is that Facebook Inc (NASDAQ:FB) has launched an Instagram checkout. This eliminates the need for the 25 million businesses on the Instagram platform to seek out the services of an external website like Shopify.
“While Shopify has been expensive for a while, the short now is not a valuation call but rather a drastic change in the competitive and regulatory landscape,” added Citron.
Left is so convinced that he is right about Shopify that Citron has pledged to donate $200,000 to the Robin Hood Foundation, a charitable organization, if Shopify is trading over $200 in 12 months.
Headquartered in Ottawa, Shopify provides retailers with a suite of services including payments, marketing and shipping to simplify the process of running their online stores.
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