What happened

For the second day running, shares of e-commerce facilitator Shopify (SHOP 0.23%) are in free fall. After declining 4.8% on Wednesday, they've already shed another 3.9% as of 12:35 p.m. EDT today.

Red stock arrow breaking up and showering down in pieces over a city below

Image source: Getty Images.

So what

Two days ago, Shopify priced a secondary offering of 1.1 million shares at $900 each. These same shares had closed above $930 the previous evening, and so it would have been understandable for investors to be perturbed that someone else was getting a chance to buy Shopify at more than a 3% discount.  

But there may be even more to this sell-off than that. Shopify expects to raise about $990 million in cash before fees from this share sale. Combined with the previously announced offering of $800 million in convertible senior notes due 2025, this is close to $1.8 billion in new cash that Shopify is amassing -- and closer to $2.1 billion if you factor in the potential for underwriters to exercise options to buy more shares and notes.

Now what

Selling 1.1 million new shares (or 1.2 million with the underwriters' option) will dilute existing shareholders by less than 1%, probably not enough to spark this week's sell-off. But Shopify confided that it plans to use all this extra cash to strengthen its balance sheet and to provide "flexibility to fund its growth strategies" -- and this may be the real reason investors are nervous.

If Shopify is raising cash with the idea of acquiring other businesses, for example, there's the risk this remarkable grower (with sales up 97% last quarter) could accidentally diworsify away from the business that made it so great in the first place.

With shares nearly tripling over the past year, investors today may be hedging their bets and collecting their profits before Shopify has a chance to fritter them away.