The white-hot run of Shopify shares has widened the company’s lead over Royal Bank of Canada for the title of the country’s most valuable company – and added billions to founder Tobias Lutke’s net worth, moving him closer to becoming the richest Canadian.
Shopify Inc. was the best-performing stock on the S&P/TSX Composite Index in the first half of the year as investors came to believe that COVID-19 will damage many legacy retailers and make e-commerce supreme. The shares are up nearly 160 per cent in 2020, with much of the gain coming since the March 23 Canadian market low.
In the second week of May, Shopify first nudged past RBC in total market capitalization, with each company worth about $120-billion. The two traded the lead for a bit.
But since the early days of May, Royal Bank has gained about $11-billion, to $131-billion, but Shopify has added about $45-billion in market cap, to just less than $166-billion, in less than two months.
The spread of roughly $35-billion is about equal to the total value of Manulife Financial Corp. The $45-billion of market cap Shopify has added is just a little less than what Bank of Montreal is worth.
The gains in Shopify shares have been a boon to Mr. Lutke, who founded the company 15 years ago and took it to the public markets in 2015 at US$17. Initially, it was primarily a provider of e-commerce websites, but it has branched out to become a back office to online retailers, providing websites, payment systems, cash advances, shipping programs and other services. With new revenue streams and new customers, investors have swooned (despite years of net losses.)
Shopify shares closed Thursday on the New York Stock Exchange at US$1,029.97. (On the Toronto Stock Exchange, open Friday for trading, the shares closed at $1,388.00.)
At Thursday’s U.S. closing price, Mr. Lutke’s stock in the company is worth just under US$8.65-billion, or about $11.75-billion in Canadian dollars, based on a review of his stock holdings records. When The Globe and Mail examined his holdings in early May, his Shopify stock was worth just more than US$5-billion (C$7-billion). And it was just early last year that Mr. Lutke’s Shopify stake crossed the US$2-billion mark, the calculation shows.
In May, Mr. Lutke ranked among the very few Canadians who are worth US$5-billion, and among the even fewer who have built their own fortunes. He’s blown by that group – which includes self-made industrialist Jim Pattison, Lululemon Athletica Inc. founder Chip Wilson, and members of the Weston, Irving, Saputo and Thomson families.
With the recent gains, Mr. Lutke is now among the three richest Canadians.
The Bloomberg Billionaires Index, updated daily, lists Joseph Tsai, a Canadian citizen who was born in Taiwan and lives in the United States, as the highest-ranked individual Canadian. The co-founder of Chinese e-commerce giant Alibaba Group Holding Ltd. has an estimated personal wealth of about US$12.7-billion and is the world’s 124th richest person, Bloomberg says.
Mr. Lutke owns just fewer than 6.9 million of the company’s special Class B shares, which allow their holders 10 votes for every one vote a common Class A shareholder has. He also owns about 125,000 shares of the Class A shares, which trade on the New York and Toronto stock exchanges. Together, those holdings are worth about US$8-billion at Thursday’s closing price.
Mr. Lutke also has just less than 675,000 stock options worth almost US$625-million, assuming they were exercised now (although some haven’t vested and are not available for sale). Of those, 403,348 were granted prior to the company’s 2015 IPO, are linked to the Class B multiple-voting shares and have an exercise price of US$6.22 apiece.
The options and other holdings linked to the common shares allow Mr. Lutke to profit from the stock’s ascent without dispensing of his special voting shares.
Trading records filed with the System for Electronic Disclosure by Insiders (SEDI) database maintained by Canadian securities regulators show Mr. Lutke has sold US$85-million of shares so far in 2020, including US$12.2-million worth in three transactions in June.
SEDI records show that on Dec. 9 of last year, Mr. Lutke established an Automatic Securities Disposition Plan, a prearranged plan intended to remove insiders’ discretion to sell based on market conditions. The SEDI records say Mr. Lutke’s stock-selling plan “will terminate no later than December 31, 2020.”
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