Why Shopify Stock Dropped Today | The Motley Fool

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 investors at 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.

Shopify gave up some of its recent gains on Tuesday. Image source: Getty Images.

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 (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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