Citron Research

About the Author Citron Research

Citron Research has been publishing columns for over 11 years, making it one of the longest-running online stock commentary websites. With over 150 reports, Citron has amassed a track record identifying fraud and terminal business models second to none among any published source. The goal of this website is and has always been to provide truthful information in an entertaining format to the investing public. Our goal has never been to engage in “gotcha” journalism. Readers are always encouraged to consider this and all information available regarding any potential investments, to seek professional assistance as necessary, and to draw their own conclusions.

Shopify Inc (US) (SHOP) Immediate Price Target Implies 50% Downside – Here’s Why

Shopify is a completely illegal get-rich-quick scheme (with a good software platform).

Shopify Inc (US) (NYSE:SHOP) is the #1 hottest stock on the Nasdaq in the last 12 months (with market cap over $11 billion). This stock doesn’t do Artificial Intelligence, Bitcoin or other magic. A company that hides under the shroud of a cloud-based e-commerce solution for Small and Medium sized Business (SMB), is the promoter of the hottest new “get rich quick” scheme on the internet.

We’re not saying Shopify’s technology doesn’t work. To the contrary, it is a good ecosystem for its Shopify plus partners to build e-commerce websites.  We would even go as far as to say that it is the best build-your-own ecommerce software on the market.

So what’s the problem?

Out of the claimed 500,000 websites, Shopify has about 2,500 “Plus” clients and maybe another 20,000 “Advanced”.  So where are the other 450,000 + websites????

Funny, this problem was first addressed when Shopify CEO Tobias Lutke knocked on Venture Capital’s door.   As we read in a Bloomberg article.

“500,000 merchants is just such a crazy number,” Lutke said. “I have lots of stories about being laughed out of VC offices because they told me the entire addressable market for my company was 40,000 stores.” (Bloomberg Aug 1, 2017)

I guess the great minds on Sand Hill Road never thought that the pressure of Wall Street can cause some companies to cross over to the dark side.

Citron will expose the mystery behind those “other web sites”.  Just like analyst reports don’t discuss churn, they miss Shopify’s deepest darkest secret.

Shopify’s Dirty Little Secret

Like any good research, we start with Google.  Just search YouTube for the term “Shopify millionaire” and their marketing strategy becomes obvious.

Shopify calls these affiliates “partners.” We call them promoters selling business opportunities. Our favorite Shopify promoter is Keder Cormier who used to be a promoter of Herbalife….same hustle different product.

Shopify’s promotion

Shopify’s Partners Right out in the Open

And Shopify doesn’t hide these promoters – they are right out in the open for everyone to see. The company goes as far as to call them “partners” and brag to Wall Street about this being its competitive advantage. As said in the last conference call.

“We now have more than 13,000 partners who have referred merchants to Shopify in the last 12 months, up from 12,000 just last quarter.”

So we can agree that Shopify’s method of recruiting is “dodgy.” but is it legal??  no!shopify’s partners right out in the open

It’s time to End this Dangerous Game of Greed

Let us start with the most obvious comparison – Herbalife.  In its settlement with the FTC Herbalife was, among other stipulations, declared to be in violation of FTC by over-promising success for its distributors.

Herbalife’s behavior was tame when compared to Shopify’s. On a corporate level, Herbalife never talked about making distributors millionaires or actually suggested that they quit their job.

What you are about to read is the most blatant disregard of FTC law ever witnessed by Citron. Don’t worry, we have made local copies, because we have no doubt that Shopify will soon take all these claims off the Internet.

On its Facebook page, Shopify promotes its service by stating that 2,700 people become millionaires each a day.


Worse, indulging in misconduct that that Herbalife could never dream of, Shopify goes so far as to offer a sample resignation letter to your boss on its corporate website. Who is Shopify’s legal counsel?!

Shopify offers a sample resignation letter


This stuff makes the violations Herbalife was sanctioned for look like child’s play.

Shopify continues to flagrantly break the law given this relationship with their “partners”.  As clearly stated by the FTC

Yet, none of these “partners” on either Google, Youtube, or any other influencer network has ever disclosed, to our knowledge, that they are being compensated by Shopify.  Moreover Shopify is abetting this by showing their “partners” how to make money writing a blog.  Yes, that is right, money for writing ….not for selling.

This relationship can be summed up clearly in this video from one of the many Shopify Partners.  Just watch the first 11 seconds of this video to understand the workings of your $11 billion company.

“hey guys, hey guys, hey guys…so here is a way, guys, for you to make money…with Shopify…not with a store where you are selling items…not with a store where you are selling items…its a way to help others get a store so they can sell their items, in return you will get residual income”(Youtube Video Titled ‘Affiliate Income with Shopify’ Jun 20, 2016)

What is the value of a Shopify Website?

In an effort to reduce the loss of revenue that comes from a high customer churn rate and delay the inevitable, Shopify recently established Shopify Exchange, where people can sell their Shopify-powered websites.  This new tool provides an alternative for people who have already lost their money with Shopify and keeps them on board as paying customers.

So as not to be accused of picking on the weak websites, Citron will focus on the ones selling for over $10,000 (the most expensive range), and having over $500,000 of revenues (another large filter).  There are exactly 10 of them.

Click on any of them to “view details” and scroll down.  You’ll see a monthly revenue chart with the same “crash and burn pattern”.  Here’s the one for “Head Over Heels Couture”.  It currently has the highest list price of any website on Shopify’s exchange.


This is one of Shopify’s top sites available for sale.  It started with an immediate bump when traffic was bought, followed by a hard selloff once the person likely realized that they weren’t becoming an “internet millionaire” anytime soon.

As you move down the food chain, there are over 3,000 sites for sale, of which an incredible 1893 websites, including gems such as and show $0 to $500 in sales.

The moral of the story is most of these sites are WORTHLESS- even the expensive one.

Shopify tries to sugar coat it with this lie:

“We have historically experienced merchant turnover as a result of many of our merchants being small-medium sized businesses (“SMBs”) that are more susceptible than larger businesses to general economic conditions and other risks affecting their businesses. Many of these SMBs are in their entrepreneurial stage of their development and there is no guarantee that their businesses will succeed.”

That is not true, Shopify.  You have high turnover because you are selling a get rich quick business opportunity to unsuspecting customers.  This is the same likely reason that you beat the original Venture Capital addressable market targets.

Churn baby Churn

The next obvious question is what is the churn? Needless to say, Shopify does not disclose the churn- why would it? The following chart shows that despite these valiant marketing efforts, associated with a high flying stock, the company has shown limited ability to leverage the growth they are selling.  The chart below shows the unit economics of this business are bad and not improving.

So What’s Does this all mean

So how do you value a company that:

  • Does not disclose its churn
  • Loses Money
  • Operates Illegally
  • Shows no operating leverage
  • Half of revenue is not subscription but lower margin revenue from merchant solutions (unlike other SaaS)

We will disregard all of the above risk factors that are not priced into the stock.  We will be generous and give SHOP the same multiple to sales as the best is class SaaS companies or even Square or Wix.  All of them trade at an average of 8.5x sales compared to almost 17 for Shopify.

Shopify Stock should be down 45% immediately, and that is before the company is caught by the FTC

Best Case Scenario for Shopify Stockholders

What If Citron is wrong on our assessment of Shopify and the future of this world is millions of people selling fidget spinners and we all become our own flea market?

Everyone knew that Workday was best is class SaaS but the bulls got carried away and bought the stock too much too fast.  Over the next 4 years Workdays revenues increased 400% but the stock performance remained flat, and trust us, Shopify ain’t no Workday.

Citron’s final note: We realize we have not honed in on profitability here.  We will save that for another day…just another problem for Shopify.


If you ever read on the Internet a way to become a millionaire working at home- it probably isn’t true.  As an investor if you believe that someone can buy Facebook ads and become a millionaire- than buy Facebook stock.  We are forwarding all of our information (hundreds of pages) to the FTC and we expect Shopify to face the same scrutiny as the many companies of the past who sell dreams to unsuspecting customers.


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