Ripped Shopify shopping bags
Image: iStock/Getty Images Plus; Protocol

Suddenly Shopify’s fight is everywhere

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Tuesday: Shopify’s new fight, why you shouldn’t call Hester Peirce “Crypto Mom,” and the UST disaster.

Off the chain

The crypto price charts were bloody, with bitcoin down 12% below $30,000 at one point Monday. Most disturbingly, the peg on Terra’s UST stablecoin fell apart. Luna Foundation Guard, a nonprofit that helps support UST, voted to loan out $1.5 billion in bitcoin, and UST held in its reserves to support the price, but that didn’t seem to work. Some called it “an old-fashioned bank run” on Twitter. The incident is likely to strengthen calls for someone — anyone — to exercise oversight of stablecoins.

— Owen Thomas (email | twitter)

Shopify’s new fight

It’s a familiar script: While the pandemic brought immense hardship, remote-economy darlings like Zoom, Netflix, Peloton and Shopify helped buffer the pain, and saw outsized gains as a result. Two years later, as pandemic fears subside and people venture back outside, demand for those companies’ services has faded, and valuations are in freefall.

The post-pandemic snapback to the “new normal” has been particularly pronounced in ecommerce. Now there are questions about whether the pandemic accelerated long-term shifts in consumer behavior or just gave these companies a temporary boost. Shopify has become a crucial test case for the post-pandemic economy.

Shopify’s earnings were so bad, its “new normal” is worse than before the pandemic. Shopify posted adjusted earnings of 20 cents per share on Thursday, after analysts estimated it would pull in about 64 cents per share. The difference sunk the Canadian company’s stock below where it was the day the WHO declared the coronavirus a global pandemic.

  • The stock price fell around 22% between when earnings were released on Thursday and Monday morning. The broader market meltdown didn’t help. President Harley Finkelstein blamed the stock drop on changing consumer habits and inflation in an interview with BNN Bloomberg. “When you compare Q1 of 2022 to Q1 of 2021, we had lockdowns, we had government stimulus and it was a very different economy,” he said.
  • Shopify loves to say it is “arming the rebels” — smaller, independent retailers — against their main competitor, Amazon. Amazon didn’t have a good quarter either, posting less growth and higher costs than analysts expected. Still, the company isn’t doing quite as badly as Shopify. Its cloud business has helped there.

Shopify isn’t showing signs of slowing down. It still has a healthy balance sheet, and it’s putting it to work by acquiring the San Francisco logistics startup Deliverr for $2.1 billion, mostly in cash.

  • Shopify canceled a slew of warehouse and fulfillment contracts in January, putting investors in a panic. Later, the company said this was because it was creating its own end-to-end fulfillment and warehouse operations.
  • Shopify also spent $450 million to buy 6 River Systems, which makes software and robots for fulfillment. The Deliverr acquisition completes the puzzle.
  • The acquisition doubles the size of Shopify’s fulfillment operation.

Now Shopify just needs to send a gag to CEO Tobi Lütke, with priority shipping. “Is there a place where financial analysts track records are kept? People seem to pay attention to them but are they held accountable?” Lütke tweeted Sunday.

  • Uh, yeah, Tobi, there is. One Twitter user was quick to point out that outlets that rely on analysts’ estimates, like Bloomberg, have elaborate systems in place to thoroughly and consistently check their performance.
  • Analysts had expected Shopify’s revenue to reach $1.25 billion this year, though Shopify only was able to achieve $1.2 billion. Merchant sales grew to $43.2 billion, whereas analysts expected $46.5 billion on average. And analysts are growing increasingly frustrated with the company’s lack of transparency, according to Bloomberg.
  • If investors grow restive about Lütke’s management, they’ll have a tougher time deposing him. Shopify announced it would grant Lütke a “founder share” as part of a forthcoming 10-to-1 stock split last month, which will result in him having 40% of the company’s voting power.

If Lütke’s going to prove he deserves that tight control over Shopify’s future, he’ll have to show that he has a strong post-pandemic vision. Fast shipping that can compete with Amazon Prime is one thing. Pushing Shop Pay for streamlined checkout is another priority. But most important may be continuing to push Shopify’s software and payments into brick-and-mortar retail. Small businesses that cycled between lockdowns and reopenings figured out they have to operate in a hybrid mode. The rebels are fighting on more than one front, and Shopify needs to be in every battle.

— Veronica Irwin (email | twitter)


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On the money

On Protocol: Users will soon be able to upload their NFTs as profile pictures on Instagram. Starting this week, some will get to test the feature, with the NFTs labeled as “digital collectibles.”

Coinbase will block some Russian customers by the end of the month. The crypto exchange notified users that their accounts will be blocked on May 31, and advised them to withdraw their funds or provide documentation that they aren’t subject to EU sanctions.

Also, Coinbase’s shares sank to a record low the day before its earnings call. The crypto exchange’s share price dropped by about 20% Monday. Including that drop, its value has fallen by more than 75% since its direct listing last year.

The Indian government is considering a 28% GST tax on crypto. A tax council is reportedly trying to place cryptocurrencies’ tax treatment on par with the lottery, casinos, race courses and betting. Crypto is already subject to a 30% income tax under a law implemented in April.


SEC Commissioner Hester Peirce would just as soon you didn’t call her “Crypto Mom.” “On the one hand, I think it's kind of funny because I don't have children … On the other hand, there are a couple reasons that I push back a little. One, I'm not an advocate for any industry … But I also think it's important for people not to think about the government in parental terms,” she said in an interview with Protocol.

Mark Cuban, the “Shark Tank” investor, has been investing in crypto for a while now, and he’s predicting that something similar to the dot-com boom will happen in Web3. “The chains that copy what everyone else has will fail. We don't need NFTs or DeFi on every chain. We don't need bridges to move NFTs between chains (does this make it fungible?),” he tweeted.

Deal flow

LootRush — think Steam, but for blockchain games — raised $12 million. The round was led by Paradigm and a16z.

Long Game, a platform that turns personal savings into a game, was acquired by Truist Financial Corporation. The company had privately raised $20 million before the acquisition, but details of the purchase weren’t shared publicly.

Ecommerce software company Swiftline acquired tracks insights from 5.9 million online retailers, according to a press release. It’s an early deal for Swiftline, which had raised $12 million as of December.

TaxBit and Deloitte joined forces to offer tax reporting solutions for companies transacting in digital assets. Deloitte’s tax expertise will augment TaxBit’s software to help companies stay compliant in a rapidly evolving space.

KeyBank acquired GradFin, which offers student loan advisory services. Terms of the deal were not disclosed, though it’s worth noting KeyBank’s M&A record: The company also bought B2B platform XUP Payments in November.

Accenture purchased Akzente, a German consultancy that helps companies hone their sustainability goals. The amount of the deal was not disclosed — you know, because going green is priceless.


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