Canadian e-commerce platform Shopify, Inc. (SHOP) is planning a 10-for-1 stock split to make shares more accessible to retail shareholders. Additionally, the company is seeking shareholder approval for “the founder share” for its CEO, Tobi Lütke, which will increase his voting power to 40% of the total voting power attached to all of the company’s outstanding shares.
Following the news, the SHOP stock popped more than 4% during intraday trading and ended the day gaining 2.4% to close at $617.38 on April 11. Year-to-date, its shares have lost 54.7% amid the broader market sell-off.
Shopify is slated for an annual and special meeting of shareholders to be held on June 7, 2022, at which the company is proposing to undertake changes to its existing governance structure that will be in the best interest of the company and its stakeholders.
The company currently has two classes of shares, Class A with one vote per share and Class B with ten votes per share. If the stock split is approved, shareholders of both classes of shares will receive nine additional shares for each share held by them after the close of business on June 28, 2022. The split will have no impact on the company’s fundamentals and will make the shares cheaper for individual investors.
Lütke has helmed the company since 2008 and since then has been instrumental in raising the company to its current highs. If the proposal for the founder share is approved, it will increase his voting power to 40% upon the combination with the existing Class B shares held by him and his family or associates.
Commenting on the decision to increase Lütke’s voting power, Robert Ashe, Shopify’s Lead Independent Director, said, “Tobi is key to supporting and executing Shopify’s strategic vision and this proposal ensures his interests are aligned with long-term shareholder value creation.”
Stock Prediction
Wall Street analysts are cautiously optimistic about the SHOP stock with a Moderate Buy consensus rating based on 13 Buys versus 13 Holds. The average Shopify price target of $982.44 implies 59.1% upside potential to current levels.
Stock Investors
TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Shopify, with 3.5% of portfolios tracked by TipRanks increasing their exposure to SHOP stock over the past 30 days.
Concluding Thoughts
Shopify has all the right ingredients to make for a good long-term investment. With the proposed changes to the governance and share structure, the company is ensuring that its actions are aligned with the best interests of all stakeholders.
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