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Shopify’s strong third quarter sent the e-commerce giant’s stock up 25 percent on Tuesday, but its quarterly earnings report also appeared to see Flexport’s losses narrow as a positive sign for the digital freight forwarder.
According to a filing with the Securities and Exchange Commission (SEC), Shopify took a $28 million net loss on its Flexport investment in the recent quarter. The losses, identified in the filing as a “net loss on equity method investment,” totaled $44 million in each of the two prior quarters, illustrating the improvement.
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These results are always reported on a one-quarter delay due to the timing of financial information availability from Flexport, according to Shopify, which means the $28 million loss came in the April-through-June period, rather than from July through September. When accounting for the delay, Shopify’s investment incurred $72 million in losses.
While the losses narrow for Flexport, the company still has to slow down a declining valuation. Shopify’s total investment is $664 million as of Sept. 30, down from the $691 million it had in the company three months earlier and far from the $838 million total as of June 30, 2023.
As of Sept. 30, 2023, Shopify owned a 17 percent equity stake in Flexport. The e-commerce company received most of that stake upon selling its Deliverr logistics and fulfillment business to Flexport earlier that year.
Based on the 17 percent stake, Flexport would be worth an estimated $3.9 billion, less than half of the $8 billion valuation disclosed in February 2022 after securing a $935 million funding round. Much of that decline coincided with the company’s navigation through lower volumes as freight demand tanked from Covid-level highs, with the company seeing freight rates fall off in kind.
A report from supply chain publication The Loadstar estimates that Flexport’s losses in the first half amount to $423.5 million based on the $72 million in Shopify’s investment losses across the two periods.
The publication also expects a break-even third quarter for the digital freight forwarder based on the strong periods for the forwarding divisions at logistics giants like C.H. Robinson and Expeditors International.
Shopify still has not revealed an update of its current stake in Flexport.
Sourcing Journal reached out to Flexport and Shopify.