Shopify loses investor Mawer due to competition; Deliverr agreement

• Ottawa-based Shopify became Canada’s most valued public business, with a market worth over US$200 billion, but the price has dropped 75% this year.
• Viswanathan said Mawer originally invested in the e-commerce software developer in 2017, two years after it went public, and later decreased its holding as the price rose.
• However, the e-commerce industry is becoming “saturated,” he said, noting Amazon.com Inc.’s move to integrate payment.

Shopify Inc. lost a long-time supporter when Mawer Investment Management’s Vijay Viswanathan announced his withdrawal from the stock due to concerns about expanding e-commerce competition and hazards.

During the pandemic, Ottawa-based Shopify became Canada’s most valued public business, with a market worth over US$200 billion, but the price has dropped 75% this year.

Read More:  Twitter has caved into Elon Musk’s demand for access to its internal data

Viswanathan said Mawer originally invested in the e-commerce software developer in 2017, two years after it went public, and later decreased its holding as the price rose. However, the e-commerce industry is becoming “saturated,” he said, noting Amazon.com Inc.’s move to integrate payment and fulfillment services and make them available on other websites – a direct encroachment on Shopify’s turf.

“Amazon is making their foray with their ‘Buy With Prime’ piece. We’re seeing a slowdown in e-commerce, and we’re seeing a slowdown in the results at Shopify. It became harder and harder to justify the valuation,” Viswanathan said on a Mawer podcast.

Shopify made its largest acquisition to date in May, a US$2.1 billion agreement for delivery firm Deliverr Inc. Viswanathan believes Shopify may have overspent.

“They made a pretty expensive acquisition in our estimation,” he said. “It may work out great for them, but essentially moving into fulfillment. That probably increases the risk as they have to get that right in order to continue to compete.”

Read More: Volkswagen is looking to set up new electric vehicle & battery plants in US

According to Viswanathan, director of research and lead manager of the Mawer Canadian Equity Strategy, Mawer clients made four to five times their money on the Shopify investment.

“We still think it’s a good business or a very good business that’s well-run,” he said. “One day it may be back in the portfolio.”