This is Why Shopify Shares Sank on Monday

Shares of Canadian e-commerce company Shopify were dropping in after-hours trading on Monday after the company announced a new secondary stock offering.

The offering is being underwritten by Credit Suisse and Morgan Stanley, according to the company’s release.
Shares were down over 5% after the bell as traders digested the news.

Shopify has announced a new offering of 1.9 million Class A subordinate shares. In its press release, the company stated that it, “expects to use the net proceeds from the offering to strengthen its balance sheet, providing flexibility to fund its growth strategies.”

The company’s release reads:

A total of 1,900,000 Class A subordinate voting shares will be offered by Shopify for sale under the Offering, which will be led by Credit Suisse and Morgan Stanley (the “Underwriters”).

Shopify will also grant the Underwriters an over-allotment option to purchase up to an additional 15% of the Class A subordinate voting shares to be sold pursuant to the Offering (the “Over-Allotment Option”).

The Over-Allotment Option will be exercisable for a period of 30 days from the date of the final prospectus supplement relating to the Offering.

Shopify expects to use the net proceeds from the Offering to strengthen its balance sheet, providing flexibility to fund its growth strategies. Pending their use, Shopify intends to invest the net proceeds from the Offering in short-term, investment-grade, interest-bearing instruments or hold them as cash.

In its last earnings report, Shopify had reported revenue of $362 million while analysts had expected $350 million.

Shares of Shopify are still up almost 150% in the last 12 months.

Disclaimer: We have no position in Shopify Inc. (NYSE: SHOP) and have not been compensated for this article.