Baerrus Magnus
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Shopify: One Of The Best Canadian Growth Stories But Needs Patience

Shopify Inc. (TSX:SH)(NYSE:SHOP) went public on May 21st and was valued at US$1.27 billion. Shopify is an e-commerce play. What its platform does is allows for other merchants to create great online shops. Rather than hire an expensive developer to make something custom for you, Shopify enables you to launch in days—not weeks—with a fully functional, branded e-commerce site. And it’s only for $79 a month.

The company makes, on average, about $600 in gross profit per year from each of its merchants. What has some investors concerned is that it costs approximately $1,000 in sales/marketing to sign up a new merchant. That means it takes over a year to breakeven on the cost of acquiring a new merchant, so Shopify has to hope that the merchants stay profitable for at least that long. The good thing is that the company is adding new subscribers, though, so it is going to continue growing.

Don’t buy until November 17th

I’m not a trader. I like to buy stock and hold it, knowing full well that in a few years, it’ll be worth much more. And I don’t think you should even consider trading Shopify. However, November 17th is a key date for those that are looking to buy shares of Shopify at the best price.

On November 17th the lock-up period ends. What this means is that people that didn’t sell their shares in the IPO are then allowed to sell their shares. The reason banks set a lock-up period is to prevent the market from being flooded with too many shares.

When you have hundreds of employees that have been waiting years for their chance to liquidate, you can imagine that November 17th is going to see a huge dumping of shares. That should send the price of Shopify down significantly.

Therefore, you should wait until this lock-up period ends to start buying shares of what should be one of Canada’s greatest growth stocks. This is a lesson you should take for every IPO: if you can’t get the original IPO price, wait for the lock-up period and buy then. You’ll get a better price.