Shopify shares plunge after report company operates outside the law

VANCOUVER — Shopify Inc. shares plunged nearly 10 per cent Wednesday after a research report alleged the e-commerce platform company operates outside the law.

Citron Research, an online stock commentary website whose reports have previously moved the direction of shares for the likes of Valeant and BlackBerry, claims Shopify’s business model does not comply with guidelines set by the Federal Trade Commission.

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In a video, managing editor Andrew Left says Shopify has mastered the get-rich-quick scheme, alleging the company’s partners recruit merchants by wooing them with promises of self-employment and million-dollar incomes.

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Shopify did not immediately respond to a request for comment.

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The company’s stock (TSX:SHOP) fell $14.25 or 9.78 per cent to $131.45 on the Toronto Stock Exchange in the afternoon, and US$10.28 or 8.8 per cent to US$106.53 on the New York Stock Exchange.

Citron Research said the stock should be closer to US$60, prior to any potential involvement by the FTC.

WATCH: Canadian company Shopify makes a deal with Amazon