Citron says Shopify is planning to acquire

This month, (STMP), a small e-postage company,  made it to Wall Street after Citron tweeted that Shopify would be acquiring the company. Also, after the tweet, company's stock which was trading at $220 rose to $400 per share, an increase of not less than 10%. 

However, if Shopify should acquire the company, there is a tendency that in the next few months, STMP stock skyrocket. Despite the fact that no news has been revealed about this, except Citron tweet, below are some things to consider 

  • Why Shopify might acquire

To be clear on this, there is no other news on Shopify planning to acquire except for Citron tweet. However, the tweet has triggered some positive reaction in the market such that's stock value has increased tremendously. This shows that if the news turns out to be real, it would yield a good result for both companies. 

Currently, with the ongoing pandemic and the resulting lockdown and social distancing measure put in place to contain the spread, more and more businesses are taking to the internet. The number of businesses online before the outbreak of the virus is a far cry away from what we have now. Online sales mechanisms keep increasing day by day. In fact, the few physical shops that are opened are experiencing little or no patronage. This shows that the only way businesses can keep their sales afloat this turbulent moment is to embrace the online sales mechanism. 

Shopify, among others, is one of the platforms that offers businesses the opportunity to trade online. Shopify provide businesses with tools that help to 

  • Create e-commerce enabled website

  • Create and evaluate digital marketing campaigns.

  • Sell their products or service anywhere they want

  • Manage orders and shopping or delivery

  • Reach out to experts on the platform who would guide them on how to promote their business.

However, despite the tools and opportunities offered by Shopify, the one thing it does not offer is what is well known for. This is nothing else but postage. Shopify business advantage does not include postage and this is the major thing is well known for. 

More importantly, without postage, the e-commerce business is not complete. After all, all orders of some sort need the postage of the buyer for a successful shipment. Hence, if Shopify wants to build an excellent all-in-one e-commerce platform, it would need postage. 

Therefore, the acquisition of might sound like a mere rumour today, but it is a very good deal should it turn out to be true. 

  • The benefit of the deal on STMP stock

If Shopify should acquire as said by Citron, the deal would promote STMP stock. According to a report, "STMP stock trades around 7x trailing sales, while other e-commerce service provider stocks like Square (NYSE: SQ) or PayPal (NASDAQ) trade around 12x forward earnings. Meanwhile, SHOP stock trades at 66x trailing sales"

This is clear evidence that there is a tendency for stock to skyrocket if the deal should turn out to be true. Even with the speculation, the company's stock is already taking a good swing. 

Furthermore, the acquisition would fill in the missing gap for Shopify. 

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