Philippe Laffont now owns 8.2% of Shopify Inc (NYSE:SHOP), the Canadian e-commerce company whose business model has come into question by Citron Research analyst Andrew Left. Left claimed in early October that Shopify stock was worth $58 or half its value at the time.
Shopify stock’s been on a roller-coaster ride in the 10 weeks of trading since Left dropped a bomb on investors.
Who Is Philippe Laffont?
Philippe Laffont runs the New York hedge fund Coatue Management LLC. Coatue manages more than $12 billion for high net-worth and institutional investors.
Laffont cut his teeth for three years (1996-1999) as a research analyst with Tiger Management Corp., the hedge fund run by Julian Robertson between 1980-2000 and made famous by all the “tiger cubs” that left to start their own hedge funds, including Laffont who departed in 1999 to set up Coatue Management.
In 2017, through the end of October, Coatue was up 29.3% or double the return of the S&P 500.
Why Does He Matter?
On Oct. 24, Coatue Management became the second-largest owner of Shopify Class A subordinate voting shares at 8.2% of the company, or a little more than seven million shares, up from 2.6 million shares at the end of September.
According to Shopify’s proxy circular and Morningstar.com, only Fidelity owns more of Shopify’s Class A subordinate voting shares, which carry one vote each, at 10.5%.
So, most of Coatue’s shares were acquired from the beginning of October through Oct. 24, a period in which Shopify stock traded between a low of $89.35 and a high of $120.69.
For simplicity’s sake, let’s assume that Coatue acquired the additional 4,380,903 shares at 10% above the 24-day low for an investment of $431 million. Add to that the 2,625,710 shares held before October, and the hedge fund’s sitting on a $723-million investment as of the close of Dec. 13 trading.
According to the company’s Sep. 30 Form 13F, Shopify is now Coatue Management’s sixth-largest holding out of 75 stocks.
Coatue specializes in technology investments. You can count on one hand the non-tech investments held by the hedge fund at the end of September.
Andrew Left’s short argument came to light Oct. 4, suggesting that Laffont jumped on the opportunity to buy a massive piece of Shopify stock at a fraction of the cost he would have had to pay only a month earlier.
Laffont’s net worth might not reach into the billions, but he’s apparently a very wealthy individual who’s done well buying and selling tech stocks.
If he’s buying Shopify stock this heavily, I’ve got to believe he’s confident that Shopify’s business model isn’t a get-rich-quick scheme as Citron Research suggests.
Shopify Stock Is a Bargain Under $100
I’m guessing that Coatue got most of its October shares between $89-$98. That tells me you ought to consider buying SHOP stock whenever it’s in that range.
I recently suggested that I was second-guessing my support of Shopify.
“Andrew Left is supposedly coming with further evidence that will damage the reputation of Shopify and Shopify stock, although the timing of when this information will be released is unknown,” I stated Dec. 12.
However, Laffont putting his money where his mouth is has reassured me that all’s well at Shopify.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.