Shopify to join Nasdaq 100 index, sending shares higher

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Shopify’s (SHOP-T) stock surged more than 13 per cent in Monday morning trading after the Nasdaq stock exchange announced the e-commerce company would join its 100 Index on May 19.

The tech-heavy benchmark tracks the 100 largest non-financial companies listed on the Nasdaq exchange.

Shopify’s inclusion is expected to increase institutional investment in the company, as index-tracking funds must adjust their holdings to include Shopify.

“We think it’s positive in that it should increase the demand and liquidity [because] a wider range of funds tracking that index would need to buy shares. Beyond that, we think it also elevates the company’s profile with investors,” said National Bank analyst Richard Tse in an e-mail.

Shopify posts strong first-quarter revenue growth, but outlook lags expectations

In a note to investors Monday, Royal Bank of Canada analyst Paul Treiber said the inclusion was likely to result in greater liquidity in the shares, and may result in a share price premium relative to peers which are not included in the index.

The Canadian e-commerce business will maintain its dual listing on the Toronto Stock Exchange.

In February, Shopify named a new U.S. executive office in securities filings for the first time and made several changes to its reporting format, suggesting it was positioning its shares to be included in major U.S. stock indexes.

And at the end of March, the company transferred its U.S. stock listing from the New York Stock Exchange to the Nasdaq Global Select Market, saying it was doing so in order to more closely align itself with its software peers.

Shopify will replace computer program and database company MongoDB on the exchange.

Canadian companies shift focus to Europe for exports, growth

This U.S. shift comes during a period of heightened political and market attention on Canadian companies, as the country faces continued trade threats from the United States.

However, last week Shopify reported a 26-per-cent revenue jump in its first-quarter earnings, and the company’s results quelled investor fears about immediate impacts resulting from U.S. President Donald Trump’s tariffs and the removal of the de minimis exemption for China. The exemption allowed for the duty-free import of goods up to a value of US$800.

“The consensus view has been that the tariffs (macro) would have the company pausing or moderating growth expectations; yet, the outlook and commentary pointed to continued growth momentum,” said Mr. Tse in a note to investors last week.