On Wednesday, investment site Citron Research published a scathing accusation that ecommerce platform Shopify — one of 2017’s best-performing tech stocks — is actually a “completely illegal get-rich-quick scheme.”
According to Citron, Shopify’s method of recruiting (which involves marketing their service as a way for “partners” to easily make millions) flagrantly violates FTC rules.
How does one little blog have so much clout?
Citron Research was founded in 2001 by Andrew Left — an ex-disgraced commodities broker turned supposed “good guy.” On his site, Left short sells stocks of companies that he thinks are engaged in fraud or shady marketing scams.
According to the WSJ, of 111 stocks Left investigated between 2001 and 2014, 90 experienced long-term drops in stock price, with an average fall of 42%. In fact, his 2015 KO of Valeant Pharmaceuticals led to a Senate investigation, a 90% stock drop, and the eventual resignation of the company’s CEO.
In other words, the guy has a tested reputation for annihilating companies he deems to be morally repugnant.
And his latest victim really pissed him off
Citron’s takedown notes that if you Google “Shopify,” you’ll get 27k results of supposed millionaires in Ferraris (AKA, Shopify “partners”), hyping up the company as a way to live a better life.
Nutrition supplement company Herbalife was hit with a $200m FTC fine in 2016 for engaging in similarly misleading marketing tactics.
But Shopify claims to have 500k legitimate, well-to-do vendors using its online store platform and says it will “vigorously defend” its business model.
In the meantime, the stock has slightly recovered — but the company will have some bigger questions to answer if the FTC comes knocking.