The logo of Shopify Inc. hangs on a wall at the company's office space in Toronto, Ontario, Canada, on March 13, 2015.Kevin Van Paassen/Bloomberg
Shopify Inc. has raised $131-million in its initial public offering, pricing the shares above an increased range as investors clamored for stock in the provider of software for small businesses.
Sources close to the deal say the offering was over 30 times oversubscribed. IPOs where demand is 10 or more times the available stock indicates very strong demand. At 30 times, the stock could perform strongly if other investors clamor to get in to the stock once it begins trading.
Shopify, based in Ottawa, sold 7.7 million shares for $17 apiece, according to a statement Wednesday, after offering them for $14 to $16. The company raised the range to that level Tuesday from an initial $12 to $14. The stock will be listed on the New York Stock Exchange under the symbol SHOP and on the Toronto Stock Exchange under the symbol SH.
Shopify provides software that helps merchants sell their products online. The company was born out of a conundrum for 34-year-old founder Tobias Lutke, who had snowboards to sell over the Internet in 2004. He said in the prospectus that the software options for setting up small businesses online were complex and expensive, and started Shopify in 2006 to solve that problem for others.
Today, 165,000 stores use Shopify.
The IPO price indicates a market value of $1.27-billion, based on 74.4 million shares outstanding. The company doubled revenue to $105-million last year, with almost two-thirds coming from merchants' subscriptions. The rest is generated through services for the small businesses. Shopify posted a loss of $22.3-million in 2014.
Company Risks
Among the risks outlined in Shopify's prospectus, the company cites payments. The company relies solely on Stripe Inc. to process the credit cards through merchants' sites, and says any disruption could affect revenue. Payments are also subject to changing regulation in the various countries where Shopify operates, according to the prospectus.
Shopify is the first technology IPO to debut in Toronto since DataWind Inc.'s $30.9-million deal June 30. Only 190 IPOs have ever listed in Toronto from the industry, compared with almost 2,000 in New York, according to data compiled by Bloomberg.
Bessemer Ventures, FirstMark Capital and OMERS Ventures are pre-IPO investors in Shopify, and none planned to sell shares. The company will have two classes of stock, with Class B representing 10 votes per share and Class A having one.
Morgan Stanley, Credit Suisse Group AG and Royal Bank of Canada managed the offering.
With files from Sean Silcoff