Shopify

Shopify’s Initial Public Offering Far Exceeds All Expectations

Shopify had its initial public offering, and it far exceeded expectations.

According to the Wall Street Journal, Shopify priced originally at $17 per share, actually opened at $28 per share. By the end of closing, a single share was selling for $25.39, a raise of 49 percent. Shopify’s IPO sold 7.7 million shares, raising over $130 million, making Shopify’s total net worth $189 million.

The original price range for the opening of $14 to $16 had been boosted earlier in the week.

Shopify, based in Ottawa, Ontario, Canada, is being listed on both the New York and Toronto Stock Markets. The Shopify shares also blew up, gaining 95 percent to a price of $30.96 Canadian, but on lighter volume trading.

According to one institutional investor, U.S.-based investors bought most of the American shares, initially indicating the New York listing would bring about the most interest in the shares.

The success of Shopify’s IPO shows two things; first, that Shopify can continue to grow as a publicly traded company, and second, Toronto is looking to diversify its offerings on the Toronto Stock Exchange.

Shopify, founded in 2006, provides software and services to companies who want to sell items online. They also work with brick-and-mortar stores and pop-up retailers using tablet computers for tracking, sales, and inventory tracking.

Bloomberg is reporting that Shopify was borne out of necessity, according to owner Tobias Lutke. Lutke used to sell snowboards, and was looking for a way to sell them on the internet in 2004. The existing software in 2004 was both expensive and hard to use, so Lutke created Shopify. Thus far, over 165,000 stores use Shopify to sell products online.

Thanks to merchant’s subscriptions accounting for two-thirds of revenue, Shopify was able to double its revenue to $105 million last year. The remaining one-third was Shopify’s services sold to small businesses. Still, Shopify reported a net loss of $22.3 million last year.

According to Shopify’s prospectus, the main risk for the company is collecting payments for their products and services. Shopify uses a company, Stripe, Inc., to process credit card payments through merchant’s sites. Any form of disruption will result in lost revenue. Ever-changing regulations in payment collections could also be an issue, according to the prospectus.

According to data compiled by Bloomberg, the Toronto Stock Exchange has 190 IPOs from the technology industry, compared to over 2,000 on the New York Stock Exchange. Shopify is the first new technology IPO since DataWind’s IPO on June 30, netting $30.9 million.

Morgan Stanley, Royal Bank of Canada, and Credit Suisse Group AG managed Shopify’s IPO. Shopify trades on the New York Stock Exchange as SHOP, and on Toronto’s Stock Exchange as SH.

[Image courtesy of Pixshark]

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