Shopify Moves Indicate Succession Planning and Activist Investor Defense

In the past few years, from time to time Shopify CEO Tobi Lutke muses about his fitness to be CEO. In the end, he gets back to refactoring and improving Shopify the company as if it were a codebase.

In the last few days, the Shopify Board proposed a few resolutions to be passed at the next shareholder meeting (these things tend to be rubber-stamped).

A. Tobi gets Founder Shares which gives him 40% voting power in the company, effectively giving him iron-clad control of the company -- EVEN IF he moves on from his current CEO role.

The two roles mentioned are "consultant" to the company (where Shopify is the primary customer), or a Board Member. This effectively secures Tobi's control in the event of succession moves.

This serves two purposes.

First, Tobi can think of what's next for him is not clouded by losing control of the direction of Shopify.

Second, it is pre-emptive activist defense. Simply, the time to prepare for an activist is before there is one.

It's not lost on the Board that in a world where someone Elon Musk or Ryan Cohen could buy a few shares, tweet, and massively affect Shopify's stock price or Board composition, it pays to be extra cautious. The company would change in an afternoon.

This could mean that the company wants to keep making risky bets (Shopify Fulfillment Network could be one example, will there be others?) without worrying if an activist would say they are misallocating resources.

B. Shopify's stock is splitting 10 for 1. Not much to report here, as this tends to happen. Could this trigger another run-up? Even though stock splits mean nothing, investors don't always see it that way.