Shopify: The Inevitable Journey to the S&P 500
Inspiration: The tensions that began to develop between CRA and Shopify.
While none of this is financial advice, my prior bets on Uber and Palantir showed the power of index inclusion.
So, we are going to talk about how Shopify’s growing tension with the CRA may be the catalyst that forces a U.S. move and unlocks the next big “pop.”
The “Event-Driven” Pattern
We saw this with the run-ups for Uber (UBER) [added December 2023] and Palantir (PLTR) [added September 2024].
When a company is added to a major index, it’s not a suggestion; it’s a forced buy for trillions in capital.
The next and most logical candidate?
Shopify (SHOP).
Thesis
Shopify has the market cap, profitability, and U.S. market dominance to earn its spot on the S&P 500.
There’s just one problem…
Which makes it upsetting to confess as a Canadian…
It is a Canadian company.
But, ironically, a high-stakes battle with the Canada Revenue Agency (CRA) is providing the perfect political and financial catalyst for Shopify to re-domicile in the U.S.
Making its S&P 500 inclusion all but inevitable.
Canada vs. Its “Golden Goose”
The CRA has been in a legal battle, demanding that Shopify turn over six years of records for over 120,000 Canadian merchants.
That’s right, SIX YEARS OF RECORDS OF 120,000 CANADIAN MERCHANTS.
Shopify is fighting this, positioning it as a “fishing expedition” and a defence of its merchants’ privacy.
This isn’t just a legal spat.
It creates a narrative of regulatory hostility.
Which is something we definitely do not need, especially in Canada.
It gives CEO Tobi Lütke, who has voiced frustrations before, a perfect, non-financial reason to justify a major corporate move.
He can frame it as “we’re leaving to protect our merchants from government overreach.”
The S&P 500 “Brick Wall” (And How to Get Around It)
Speculation is that The CRA fight has ignited long-standing speculation that Shopify will move its primary listing and incorporation from Canada to the U.S.
The real reason, though, is to be included on the S&P 500.
This is the crucial, multi-trillion-dollar incentive.
The Rule
A company cannot be in the S&P 500 unless it is a U.S. company. It must be domiciled in the U.S., have its primary listing on the NYSE or NASDAQ, and meet market cap/profitability rules.
That’s why you don’t see Spotify (which, funny enough, is often mixed with Shopify), on the list either.
The Lockout
Despite its massive size (over $200B market cap at its peak) and the fact that the U.S. is its largest market, Shopify is permanently ineligible as a Canadian entity.
The Solution
By re-domiciling to the U.S. (likely Delaware), Shopify would instantly become eligible for selection by the S&P committee.
The CRA fight provides the perfect justification to present this strategic financial move as a defensive, principled stand.
Why S&P 500 Inclusion is the “Holy Grail”
Benefit 1 (Shareholders & ETFs): The “Inclusion Pop”
This is the main event. Trillions of dollars are in passive index funds and ETFs (such as VOO, SPY, and IVV) that track the S&P 500.
The moment Shopify is added, every single one of these funds is forced to buy billions of dollars’ worth of SHOP stock to rebalance their holdings.
This is a massive, non-fundamental, and highly predictable wave of demand, which almost always drives the stock price significantly higher.
Benefit 2 (The Brand): From “Tech Giant” to “Blue Chip”
Joining the S&P 500 is a “corporate rite of passage.”
It’s a stamp of approval that signals profitability, stability, and systemic importance to the U.S. economy.
Shopify would move from being a “high-growth tech stock” to a “blue-chip institution,” increasing its appeal to more conservative, long-only pension funds and institutional investors.
The Inevitable Event
The move from Canada to the U.S. is a simple cost-benefit analysis.
The “cost” is a complex legal move, but the “benefit” is unlocking trillions in forced capital.
The CRA’s legal overreach is the perfect catalyst.
It gives Shopify the political cover to make a decision that was already financially obvious.
For investors who follow the patterns (like the Uber and Palantir plays), the signal is clear.
Shopify’s journey to the S&P 500 is no longer a matter of if, but when.