I really hate commenting on market speculation but Andrew Left’s attack on Shopify today was self-righteous, malicious and misguided on so many fronts. Shopify dropped like a rock on the basis of a short report issued by his firm, Citron Research. The company’s track record is shoddy at best, and their arguments are designed to mislead and create undue investor frenzy.
In this instance, Left draws parallels to the pyramid scheme that nearly crippled Herbalife and accuses the e-commerce giant of being complicit to similar behavior. Co-investing with Left would have resulted in a near 30% erosion in the value of your initial investment, since inception. While the graphics and charts he presents may indeed create an appealing narrative, perhaps go as far as sounding the alarm bells on Shopify, it should be noted that this is the same individual who had been banned from trading in Hong Kong for publishing false and/or misleading statements attacking companies and their practices.
Andrew Left has been around since the early 2000s, if not earlier, but his claim to fame was exposing the fraud at Valeant Pharmaceutical. Even a broken clock is right twice a day. He has been HORRIBLY wrong on Nvidia, Chemours, Tesla and the list goes on. It is perfectly fine to be bearish on a stock, you could hate SHOP for its valuation, its business or even its management team, and you could short the stock if you choose, but it is unacceptable to accuse a company of fraud or malpractice with nothing more than selective blog posts, misleading parallels and Google searches carefully chosen to support your argument.
Shopify challenges the traditional brick and mortar business model in a very real and enduring way. Entrepreneurs are the backbone of any thriving and growing economy, the blog posts and content that Shopify curates aim to encourage entrepreneurship and inspire different ways in which small businesses can grow their income, and that also includes connecting companies with partners and influencers who can help build a company’s brand, market their products and enhance their online presence.
More transparency is always welcome, and Shopify could definitely do a better job in contextualizing their claims, it still doesn’t justify creating undue noise based on nothing more than conspiracy theories. Perhaps ‘the FTC will take notice’ and investigate Shopify, but I really hope that both the SEC and the OSC take notice of Citron’s actions and investigate the company for market manipulation, I suspect they’d be on the losing end of that battle. Interestingly enough, most of Andrew Left’s cries of foul play are out of jurisdiction, and come with carefully crafted language that protects him from legal scrutiny. Other than that, I have no opinion.