This morning I heard on the news that an American short seller had given Shopify, a large Canadian company, a negative review. That caused Shopify’s stock to drop 7-11% over two days.
It was glorious. Not the news itself – the fact that I understood what they were talking about!
Shopify is based in Ottawa and has technology that helps people set up and run online stores, for a monthly subscription fee. It’s been doing really well on the Toronto Stock Exchange and the New York Stock Exchange, so this news is rather shocking. Right now, it means people looking to get in can take advantage of a slight sale on the stocks. (But if it goes on long term, people at the company may lose their jobs.)
The short seller is saying, basically, that the stock isn’t worth its price. (Click here if you want to hear why.) That means that if you own Shopify stock, it’s not worth as much as you thought, and could drop once everyone realizes it, wiping out some of your money-on-paper. (To me it’s all just money on paper until you need to cash it in for something. Like paying your nursing home bills in retirement.)
You may have heard the phrase, “buy low, sell high.” Well, a short seller does that too – but in reverse order. It’s complicated, but they’re betting on stocks going down, not up. They sell first, when it’s high, then to fulfill the order they buy when it’s low. So if they sell for $10 today and buy for $5 tomorrow, they’ve made $5. (If they’re wrong and it goes up to $15, they’re out $5.)
So after all these months of studying and sticking with the Canadian Securities Course I feel like I’ve actually learned something. It’s almost like conversational Spanish – I’ve finally moved a bit beyond “Una cerveza por favor.” ¡Olé!
(In other news, I’ve finally finished the course work for CSC. Now a month or so of studying, then I’ll book the final exam. Progress!)