Wednesday's Headlines: Shopify’s Stock Split Comes Into Effect
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Trip.com Group (TCOM) 10.8%
Wynn Resorts (WYNN) 3.2%
IMAX (IMAX) 1.4%
Core & Main (CNM) 0.5%
Moving Down ⬇️
Shopify (SHOP) -90.6%
Farfetch (FTCH) -11.4%
Etsy (ETSY) -8.2%
The Trade Desk (TTD) -7.7%
Here are the stories that you need to know ahead of market-open today, Wednesday, the 29th of June.
Shopify’s Stock Split Comes Into Effect ✂️
If you’re checking the charts ahead of market-open today, you might get a bit of a fright as it shows that Shopify (SHOP) stock is down over 90%.
Don’t worry though — this is just because the company implemented a 10-for-1 stock split after the market closed yesterday and some of the charts haven’t altered to reflect the change yet.
Announced by management a couple of weeks ago, a stock split means that Shopify has essentially broken up every single share it has into ten pieces. This has the effect of dividing the nominal share price by ten, while the number of outstanding shares in the company will multiply by ten.
So, if you’re a current Shopify shareholder, the value of your holding hasn’t changed in any meaningful way. For example, if you held 10 Shopify shares at $350 (the closing price last night), you’ll wake up this morning with 100 Shopify shares at roughly $35 a piece.
There are many reasons why companies perform stock splits like this. Primarily, the fact that now there are more shares on the market makes it even easier for people to buy and sell them. This can boost demand and drive up the stock price for a short time following the split.
As part of this change, Shopify is also issuing a new class of non-transferable founder shares to its CEO and founder, Tobi Lutke. This will give him a total voting power of 40% when combined with his existing Class B shares and represents a massive vote of confidence in favor of the founder-CEO.
Pinterest CEO Steps Down Suddenly ⬇️
Ben Silbermann, the CEO of social media platform Pinterest (PINS), announced yesterday that he will be stepping away from the company. The former head of Google’s (GOOG) commerce business, Bill Ready, will take over the position, effective today.
Pinterest stock is currently trending upwards by over 6% in pre-market trading on the back of the news.
According to the outgoing Silbermann, “the decision is driven by what I think is best for Pinterest.” Pinterest has been actively looking to shift beyond an advertising-centric revenue model and become a larger force in the world of e-commerce. The installation of Ready as the new company head will likely spearhead this move following his experience in guiding Google’s e-commerce fight against companies such as Amazon (AMZN).
According to the soon-to-be CEO, “as someone who has spent most of my career in commerce and payments, it’s so clear to me that Pinterest has the opportunity to build something unique—something special.” Investors seem to believe so too, or at least think that a change in leadership could benefit the company, as the stock continues to rise pre-market.
Pinterest is currently down close to 46% year-to-date and is likely to continue to suffer amid a widespread sell-off in the broader tech industry. It’s a difficult time to try and shift focus to e-commerce, with consumers spending less and less money as inflation continues to rise. While this change could certainly benefit the company in the long term, short term headwinds still remain.
Apple Comes Crawling Back to Qualcomm 📱
Wireless technology company Qualcomm jumped 3% on Tuesday after a prominent analyst indicated that the company would become the exclusive supplier of 5G modems to the next generation of Apple (AAPL) iPhones.
Ming-Chi Kuo, an analyst at TF International Securities, noted that while Apple is eagerly developing its own 5G modem chips, the technology does not appear ready for market. For this reason, Qualcomm will likely outfit the entirety of iPhones until the end of 2023. This would be an upgrade for the San Diego-based firm, which previously predicted it would only handle 20% of future iPhones.
However, Qualcomm’s victory may only be temporary. Apple acquired Intel’s modem business three years ago and has been feverishly pouring resources into it. This is largely because Apple hates Qualcomm.
The two tech giants came to odds in 2019 after Apple accused the modem-maker of charging unreasonably high fees for access to its 5G tech. However, Apple was forced to settle this suit as Qualcomm is the only sophisticated 5G modem manufacturer in the world and a prolonged feud would delay the release of iPhone 12.
Apple ended up paying Qualcomm $4.5 billion in a settlement and signing a six-year licensing agreement. Management disclosed the lucrative deal boosted Qualcomm’s earnings-per-share by more than $2 a year.
Despite the Apple dispute, the rest of Qualcomm’s business seems entirely secure. As the world’s leading 5G modem manufacturer, it has a presence in all kinds of verticals and deals with all the biggest names including Samsung, Motorola, Sony, LG, and even Meta’s VR tech.
With 5G expected to expand rapidly in the coming years, Qualcomm should be well-positioned to ride the wave, even if Apple manages to bring its modems in-house.