What Shopify Inc’s (TSX:SHOP) $500 Million Toronto Investment Means for Investors

Shopify Inc (TSX:SHOP)(NYSE:SHOP) just invested $500 million in Toronto office space. What does this mean for investors?

| More on:

It’s been a wild year for Shopify Inc (TSX:SHOP)(NYSE:SHOP) stock. Starting off the year at $132, it has since risen to about $210–but not without some wild swings along the way. While Shopify’s year-to-date gains have been great, many are wondering whether the company can achieve profitability.

For those who are worried about Shopify bleeding out cash, the latest news may not be encouraging.

Recently,  Shopify made a big splash by investing $500 million in Toronto office space. The office will occupy the top floors of The Well, a 38-storey skyscraper being built at Front Street West and Spadina Avenue. Shopify will be the “anchor tenant” of the building, which means that the Shopify logo will hang at the top of the building. Shopify will occupy 253,000 square feet over four floors.

Big news, indeed. But what does it mean for investors?

It helps to start by looking at the complex itself.

What is “The Well”?

The Well is a joint venture between Allied Properties REIT and RioCan REIT. The property consists of a number of buildings, including eateries, shopping spaces and office space. Shopify will occupy the top floors of the flagship office building.

Based on early images and floor plans, The Well certainly looks like a swanky office building. The question is, will Shopify’s $500 million investment in that spot benefit investors? To answer that question, we need to understand what makes tech companies tick.

Talent: the key to tech success

The tech world is an incredibly competitive industry. Tech workers are routinely recruited from top schools or on the basis of their ability to complete savagely difficult puzzles. Top dotcom companies like Facebook and Google will often get into soft “bidding wars” to recruit the elite workers who make the cut.

And these companies do it for a reason. Recruiting top programmers means that companies can build applications that are faster, more user-friendly and more fully-featured than their competitors’ products.

Tapping a high-tech workforce

Which brings me to my main point:

Shopify’s $500 million office investment may make sense if we think of it as an investment in attracting top tech talent. Toronto is ranked as the ninth most high-tech city in the world and the first in Canada. This means that Toronto many highly skilled tech workers, which provides any Canadian tech company with a strong incentive to have an office there.

So there’s a clear incentive for Shopify to have a presence in Toronto. As for the $500 million price tag, that seems harder to justify, but it’s important to note that office space amenities can help attract tech workers who see plenty of options to choose from. It’s one of the reasons why Google and Facebook keep their offices well stocked with snacks and recreational activities and invest heavily in office space.

Whether this $500 million investment will help Shopify become profitable remains to be seen. But one thing is certain: it shows that Shopify is playing in the big leagues when it comes to attracting tech talent.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Andrew Button has no position in any of the stocks mentioned. David Gardner owns shares of Alphabet (A shares) and Facebook. Tom Gardner owns shares of Alphabet (A shares), Facebook, and Shopify. The Motley Fool owns shares of Alphabet (A shares), Facebook, Shopify, and Shopify. Shopify is a recommendation of Stock Advisor Canada.

More on Tech Stocks

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

AI microchip
Tech Stocks

Celestica Stock: Buy, Sell, or Hold?

Celestica's stock price has rallied 950% in the last five years. Will the AI boom send it even higher in…

Read more »

data analyze research
Tech Stocks

2 Ridiculously Cheap Growth Stocks to Buy Hand Over Fist in 2024

Well Health Technologies is a cheap growth stock to buy for its record-breaking results, massive revenue growth, and profitability.

Read more »

A worker uses a double monitor computer screen in an office.
Tech Stocks

4 Reasons to Buy Kinaxis Stock Like There’s No Tomorrow

Kinaxis stock has a strong past. But there is even more to look forward to from this top tech stock.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

The Future of AI: Best Canadian Stocks to Buy Now

Here are two of the best AI-focused stocks in Canada that you can consider adding to your portfolio before it’s…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

2 TFSA Stocks to Buy Right Now With $7,000

Are you looking for growth stocks that can help you maximize the tax-free withdrawals of the TFSA? This article is…

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy Right Now for Less Than $1,000

Not all tech stocks are the risky investments that many think they are. Which is why we're focusing on the…

Read more »