What happened
E-commerce powerhouse Shopify (SHOP 1.11%) saw its stock swoon in Tuesday afternoon trading, closing the day down 8.2%.
In a statement on its website entitled "Supporting Ukraine," Shopify advised that it is "temporarily suspending operations in Russia and Belarus." The company also said that "for the foreseeable future, Shopify will not collect fees from our Ukrainian merchants and partners. With millions of Ukrainian refugees in desperate need of support, we will contribute funds to provide humanitarian aid."
Image source: Getty Images.
So what
Investors are apparently reacting to this news today. In fact, I'd go so far as to say they are overreacting to this news.
True, Shopify can be expected to lose revenues from Belarus and Russia in the short term. But it will also be avoiding the costs of running its business there. In Ukraine, Shopify will incur all of its ordinary expenses from running its Ukrainian operations without bringing in any corresponding revenues to offset its costs, and arguably this might hurt its financial results a bit more.
Now what
That being said, let's keep this in perspective.
None of Russia, Belarus, or Ukraine appear to be of material size to Shopify in revenue terms. The effects certainly aren't big enough to have convinced Shopify of a need to mention them in its announcement today. And after reviewing the company's annual report, I think I see why.
It turns out that none of Russia, Belarus, or Ukraine are sufficiently material to Shopify's business to have been mentioned even once in the annual report. This is in contrast to the United States or Canada, both of which are discussed dozens of times. Even smaller markets are mentioned. France is mentioned once; the Netherlands five times; and Ireland a full dozen times.
Simply put: If Shopify doesn't feel a need to mention Russia, Belarus, and Ukraine in its annual reports, investors probably don't need to sell off Shopify stock on any news specific to this region.
