Shopify Inc. is making moves that could allow it to enter major stock indexes, which would direct a flood of investor money into shares of the Canadian e-commerce platform.
The Ottawa-founded company is set to transfer its US-listed shares from the New York Stock Exchange to start trading on the Nasdaq Global Select Market from Mar. 31. The move could pave the way for a spot in the tech-heavy Nasdaq 100 Index, which is designed to track the performance of the hundred largest Nasdaq-listed non-financial firms.
“Being included in that index would equate to more buying power for a stock,” said Matthew Maley, chief market strategist at Miller Tabak + Co, citing inflows into funds tracking the Nasdaq 100 in recent years.
Shopify, which has a larger market capitalisation than all but 24 Nasdaq-listed stocks, has risen 16 percent — more than the broader index — since announcing last week that it would transfer its US-listed shares to the marketplace. Even after Shopify moves to the Nasdaq, it will continue to have a dual listing on the Toronto Stock Exchange.
Size, and a listing on the exchange, are the main factors that determine whether a company is added to the Nasdaq 100, but there is no certainty on whether and when Shopify will make it in. Representatives for Nasdaq and Shopify declined to comment on the potential addition to the index.
Inclusion in benchmarks is becoming more important for companies in a world increasingly dominated by passively managed investment funds. These products — including mutual funds and exchange traded funds, or ETFs — are required to buy the shares of member companies to reflect the index’s composition.
Bloomberg Intelligence estimates that 21 percent of the shares of the average publicly listed US stock are owned by passive funds — more than triple what it was in 2013. And products tied to the Nasdaq 100 control hundreds of billions of dollars.
In the last five years, 48 newcomers to the Nasdaq 100 gained an average of 3.7 percent in the time between the announcement and the addition to the index, according to data compiled by Bloomberg. In the 25 days that followed, half the stocks erased those gains.
“In large part there’s some preheating the inclusion and the benefits to be had by these companies, but in the case of names that are already broadly recognised, the impact is diminished,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
Joining an index can also mean that a company’s stock returns are more closely tied to the performance of the broader market over time.
“It’s a two-way street,” Miller Tabak’s Maley noted. “Once the stock has become part of a big index/ETF, the selling can become bigger during a bear market.”
Canadian Companies
Shopify’s move represents, in at least one way, a step up for Canadian stocks. Out of the 520 companies earning a spot in the Nasdaq 100 this century, just three have been domiciled in Canada. Two of those were been removed from the index: ATI Technologies Inc., a chipmaker acquired by Advanced Micro Devices Inc. in 2006 and BlackBerry Ltd., the early smartphone maker that fell victim to the success of Apple Inc.’s iPhone. The only Canadian firm currently in the index is Lululemon Athletica Inc., the Vancouver-based athleisure brand.
Shopify has jockeyed with Royal Bank of Canada, which is only listed in Toronto, for the title of the largest Canadian company.
Last month, Shopify surprised investors by filing a domestic issuer 10-K instead of the foreign issuer 40-F form that it has submitted in the past to the US Securities and Exchange Commission. The new filing mentions New York as a “principal executive office” alongside its Canadian address.
That led some analysts to conclude that Shopify might be gearing up for an official domicile change that could set the scene for S&P 500 membership. Shopify has made over 60 percent of its revenue in the US every year since at least 2012. Its home country accounted for less than 6 percent of sales in 2024.
The company’s decision plays into Canadian angst about the flows of goods and investments into and out of the US as President Donald Trump pursues tariffs against Canada and threatens to turn it into the 51st US state.
Even if Shopify changes its legal domicile, it could remain in the S&P/TSX Composite Index for Toronto-listed stocks. A few days after the filing mentioning Shopify’s New York presence, the S&P Dow Jones Indices proposed changes to its eligibility criteria that would allow companies that aren’t domiciled in Canada to remain part of the Canadian index.
By Subrat Patnaik and Curtis Heinzl
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