Shopify (NYSE:SHOP) stock is on the rise Thursday after the e-commerce company revealed plans to sell its logistics arm to Flexport.
Shopify won’t be getting any funds directly from Flexport as part of this sale. Instead, the company will receive a 13% stake in Flexport for its logistics business. To go along with that, the company will gain the right to name one person to Flexport’s Board of Directors.
In addition to this, the sale of Shopify’s logistics division will see Flexport become its official logistics partner. This will also see the company act as the “preferred provider” for Shop Promise.
Harish Abbott, co-founder and CEO of Deliverr, will oversee the sale alongside Flexport CEO Dave Clark. The two companies are expecting the deal to close during the second quarter of the year.
Why the Logistics Sale?
Shopify started to focus more on building out its logistics arm during the Covid-19 pandemic. At that time, e-commerce was on the rise as lockdowns saw more people shopping from home. However, the end of lockdowns has resulted in customers returning to brick-and-mortar stores.
As a result, Shopify has seen its revenue fall from the highs it experienced during the pandemic. One of the things weighing on the company has been its logistics business, which is likely why it’s selling the division to Flexport.
SHOP stock is up 19.1% as of Thursday morning.
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On the date of publication, William White did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
