Musaffa Academy continues with its halal stock series. This time our readers requested Shopify stock (SHOP), that is listed in the Canadian Stock Market. Is Shopify Stock Halal? Read more in the following, to find out.
The criteria for Shariah-Compliance for the stock are:
- The impermissible business activity should be less than 5%
- Interest-bearing debt to company’s market capitalization should be less than 30%
- Interest-bearing securities to company’s market capitalization should be less than 30%
Shopify’s Business
Stock – SHOPIFY
Ticker – NYSE: SHOP
Sector – Information Technology
Compliance Status – Questionable
Shopify (SHOP), is a company that operates as a cloud-based commerce platform. It is designed for small and medium-sized businesses. Currently, it employs more than 7,000 full-time employees with the headquarter of the company being in Ottawa, Ontario. In 2015-05-21, the company went to IPO.
The company offers software to merchants to run their business across all of their sales channels, including Web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces. Moreover, the Shopify platform provides merchants with a single view of their business and customers across all of their sales channels and enables them to manage products and inventory, process orders and payments, fulfill and ship orders, build customer relationships, source products, leverage analytics, and reporting, and access financing, all from one integrated back office. The firm’s principal place of business is the Internet. Furthermore, the firm has several subsidiaries including Donde Fashion Inc. and Donde Mobile R&D Ltd. (Donde).
Financial Screening
Firstly, we check the business activity of Shopify, to find out if Shopify is Shariah-Compliant. Shopify’s business model is quite simple: In Canada, the United States, the United Kingdom, Australia, Latin America, and globally, a commerce corporation provides a commerce platform and services.
| Non-Islamic business activities | 1.67% |
| Revenue from questionable segments | 69.33% |
Even if there is not inherently impermissible revenue in the business, 69.33% of the revenue comes from questionable resources.
Secondly, we examine the interest-bearing debt of the company. The debt amount should not exceed 30% of its market cap. In the case of Shopify, the percentage of interest-bearing debt is 0.93% of its market cap. So, we can conclude that it meets the criteria.
| Total Debt | 910.38M |
| 36 Month Average Market Capitalization | 97.79B |
Finally, we screen the interest-bearing ratio of the company. Shopify’s interest-bearing ratio accounts for 8.22%. The number of securities that aim to receive interest should not exceed 30% of its market cap. So, it meets the last criteria as well.
| Cash and Interest-Bearing Securities | 8.04B |
| 36 Month Average Market Capitalization | 97.79B |
Despite passing two financial screening requirements, Shopify generates more than 5% of its total income from unknown commercial operations. As a result, from a Shariah perspective, Shopify stock is one of the questionable stocks, and Muslim investors should avoid investing in such questionable assets that cannot be confidently described as halal.
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