Shopify CEO Tobias Lutke, centre, is celebrated as he rings the New York Stock Exchange opening bell marking the company's IPO on May 21, 2015.Richard Drew/The Associated Press
Andrew Left of Citron Research spoke briefly to The Globe and Mail about his campaign against Shopify Inc. in New York on Oct. 13.
Read more: Shopify to address short-seller accusations with quarterly results
So now you are the latest U.S. guy targeting a Canadian company.
This has nothing to do with Canada. This company happens to be based in Canada. It's a publicly traded company, that's it. I was positive on BlackBerry, so it equals itself out.
I know the Canadians want to make it a Canadian story sometimes, but there is nothing Canadian about this story.
All right, so then tell me what the story is.
It's about a company [that] has a good software platform but in order to juice their numbers, and in order to give their business an illusion of being bigger than it probably is, they have gone to telling people "get rich," and they are selling business opportunities to a large group of people and that's helping them achieve these numbers of 500,000 stores.
It doesn't mean they don't have a product. And I complimented them, saying they have a good product, right? They do. So if I say "It's not an $11-billion company, maybe it's only a $5-billion company," is that such a bad thing?
You don't believe that the number of customers itself is made up, you are questioning how much value there is to this third tier [of smaller merchants using Shopify's products].
Exactly, and then I think it'll get a high churn. I think there's no real quality to it. And it also makes me wonder of the quality of their real business when you start going there. If their true core business had as big a growth as they say it has, then why do they even have to pander to this other side? I am starting to think it is very immature management.
How much of Bill Ackman's Herbalife campaign did you draw from in crafting your original thesis?
Nothing.
He said it was going to go to zero, based in part on the U.S. Federal Trade Commission taking action and that's just not what happened.
But I never said that.
Right, did you not say that because of what Ackman …
No, no, no; the parallels were this. The cover of Ackman's article [on Herbalife] was, "Who wants to be a millionaire?" Quite commonly, Shopify puts these words in: "Do you want to be a millionaire?" This is on the Shopify website. Not third-party people saying it. It's Shopify saying, "Become a Shopify millionaire. Here's how you quit your job."
I thought the Herbalife settlement with the FTC was interesting, where the FTC said to them, "You can't show things of lavish lifestyle or 'quit your job.'" Sure enough, go on the website of Shopify and [it says], "Here is how you quit your job. Here is a sample letter." It just shows that the company can run afoul of the FTC. And if the company tomorrow got sued by the FTC, what would shareholders think then? This company … needs to get rid of the crazy language. It needs to get rid of the aggressive marketing. It needs to be exactly what it is, a good SAAS [software-as-a-service], e-commerce platform and let the valuation fall where it is and if it happens to be $4-billion, then it's a good $4-billion company.
This interview has been edited and condensed.
David Milstead