Citron Blows

Analysts push Back…

More analysts are coming to the defense Shopify (SHOP), which has suffered a huge retreat after storied short-seller Citron Research blasted the Canadian e-commerce company as “a get rich quick scheme.”

Reuters reports that Shopify issued a statement today in which it “vigorously” defended its business model and claimed that retailers using its software had generated $10.7 billion in gross merchandise volume in the first half of the year.

Still, Citron’s allegations continue to hang over the stock. After falling 12% yesterday, the shares have tumbled another 2% today to $101.27 after falling more than 9% earlier in the day.

Credit Suisse analyst Michael Nemeroff weighed in with a brief note that called the central logic in Citron’s report “flawed,” and continued to recommend that investors buy the stock.

I love the company but I follow the rules (my rules) so I never love a stock. That said, anyone who reads much here knows SHOP is my largest position and I feel it is one of those once-in-a-career stocks we all hope to find. But even as I said that I almost always joked about the price being too high. Well, it wasn’t a joke. I will own SHOP again, I have no doubt. But I’m 70% ahead on SHOP with a CAGR of 135% (far down from its high) so I’m going to book profits now and watch it like a hawk for a re-entry position.

I don’t recommend this for anyone else, but having been such a cheerleader for SHOP I feel I owe it to you guys to tell you what I’m doing. It’s only a few hundred shares; I’m just a little guy, so not to worry. :slight_smile: I hate what Citron has done, what a wimp. But unless the SEC decides to do something about this mouth-without-a-brain–theoretically it could happen–the affect will be real.

But arguments about valuation, folks … I use many formats to value companies including rockets and well, if I can’t justify the price, maybe no one can. To be clear, I can not, not even close.

I haven’t had time to spend on ports lately, except to sell a few positions that weren’t meeting my high bar of performance. I haven’t replaced anything, so now I’m way over 50% cash due to time factors only, nothing to do with market valuation. Meanwhile I wish you true blue loyalists the best of luck.



How does Sean Connery pronounce Citron?


I am thinking that Left is putting himself at risk of becoming the boy who cried wolf in the near future. A recent Seeking Alpha article even had something like that in its title shortly after the UBNT attack. Citron is going to have to start being a bit selective/strategic if he hopes for his “reports” to continue to have a substantial initial impact on stock prices.

The especially dirty part is that as a market mover, he can time his shorts perfectly. I don’t know whether he exclusively shorts shares or if he might also buy some puts prior to releasing his reports, but to know the timing of when he is going to be releasing a report can be much, much more lucrative even than if he knew earnings numbers prior to their release. With Shopify puts and the 23-26% peak-to-trough drop that this report initiated, many different put strikes purchased on Tuesday could have had gains of 2,000+% from Tuesday afternoon to the lows on Thursday morning (if timed perfectly).

I have to imagine that Andrew Left is getting plenty of SEC scrutiny. If not, he absolutely should be.

“No one ever went broke underestimating the intelligence of the American public.” H. L. Mencken