Coupang Stock IPO: Is “South Korea’s Amazon” a Buy?

Update: March 11.

The first shares of Coupang stock began trading at 12:35 p.m. ET at a price of $61.18. Within 40 minutes the share price of Coupang had fallen to $50.90.

Even after the drop, Coupang is trading for 45% above its offering price of $35 per share.

Here’s what you need to know if you’re considering investing in Coupang after its IPO.

Coupang

IPO Interest

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What is Coupang?

Coupang is an ecommerce company that is quickly being labeled as the Amazon of South Korea. Coupang has taken market share from Amazon in its home country due to its lightning-fast Rocket Delivery service that delivers nearly 100% of all orders within one day.

Expected IPO Date:

2021

Bull Case

  • Demographic tailwinds: South Korea’s highly educated citizenry and developed economy are well-suited for ecommerce adoption. The country boasts higher internet penetration rates than the United States and is more densely populated, both positives for online shopping.
  • Growth: Coupang’s IPO S-1 registration statement reported 90% revenue growth over the prior year, powered by a significant increase in active customer growth and spending per active user.

Bear Case

  • Competition: Coupang faces intense competition from established rivals, most notably from Amazon.
  • Lack of profitability: Despite the strong growth, Coupang remains unprofitable and might not be profitable for many years as it invests in future initiatives.
  • Agency risk: Coupang has a dual-class structure with founder and CEO Bom Kim retaining the majority voting interest. Shareholders will have little recourse to influence future strategies and decisions.

Coupang News & Analysis

Bull Case: Why Would You Want to Buy Coupang Stock?

Amazon’s legendary 20-year stock run has made founder Jeff Bezos the richest man on the planet and many long-term investors millionaires. However, with a market capitalization of $1.6 trillion (yes, with a “T”) it’s unlikely Amazon can provide new investors this same record of returns even with flawless execution.

As a result, investors are clamoring for “the next Amazon,” smaller ecommerce stocks positioned to capitalize on the demand for online shopping, which still is in the early-adoption phase in the United States.

However, the real gains are happening outside the United States. Investors are increasingly looking for foreign ecommerce stocks and have been handsomely rewarded as names like South Asia’s Sea Technology, Africa’s Jumia, Latin America’s MercadoLibre, and China’s Alibaba have exploded in recent years.

Naturally, investors are asking if South Korea’s Coupang will be the next ecommerce success stock.

Coupang is firing on all cylinders, according to the February 2021 S-1 IPO registration statement. In 2020 Coupang posted revenue of $12 billion, a 91% increase over the prior year.

Coupang S1

Look for Coupang to continue growing at a rapid clip. South Korea is behind the United States in ecommerce but has the factors in place to rapidly scale adoption:

  • At 96%, the country has one of the highest internet penetration rates (larger than the United States’ 90% figure)
  • South Korea’s population density is five times higher than the US, easing the burden of nationwide delivery. Coupang notes nearly 70% of all Koreans live within 10 minutes of one of its logistical centers.
  • South Korea has the twelfth largest economy as measured by gross domestic product and with a GDP/capita of nearly $32,000 has citizens with disposable income.

Coupang is taking advantage of these factors. The company grew active customers 18% in 2020 over the prior year. While customer growth was impressive, Coupang’s 62% year-on-year growth in net retail sales per active customer is more impressive.

The takeaway is clear, once Coupang gains a customer the company deepens their relationship. Like Amazon’s Bezos, Coupang CEO Bom Kim is intently focused on the customer experience and it shows in the form of larger and more frequent purchases from Coupang’s customers.

Look for Coupang’s growth to continue. According to research from IDC, total ecommerce spend from Korea shoppers is expected to grow to $4,300 on a per-user basis, significantly higher than Coupang’s current run rate of $1,024. That figure will increase as Coupang wins share in this rapidly growing market.

Bear Case: Why Would You Want to Avoid Coupang Stock?

Investors might not have noticed due to strong stock returns from Amazon, MercadoLibre, Jumia, Sea Limited, and a host of ecommerce stocks, but this is a notoriously difficult industry to succeed in. Companies face adversity on a host of fronts, most notably via competition through established incumbents like Amazon that can win on pricing due to their immense scale.

To date, Coupang has been able to execute in its home market. CNBC summed up the company’s success in a headline that proclaimed Coupang “is crushing Amazon,” which might be more hyperbole than fact.

However, investors need to know Jeff Bezos once considered naming his business “Relentless” and his company has embodied that approach ever since. Although Amazon has been less successful at crushing competition in foreign markets, count the company out at your own peril.

Amazon has a hidden weapon in the form of its Amazon Web Services (AWS) division, the most-profitable segment of the company. The success and profitability of AWS gives Amazon additional runway in treating international ecommerce markets as loss-leaders and taking risks.

Coupang is experimenting with additional services like its Coupang Play service but lacks the supporting services Amazon has succeeded in at this point.

This presents a potential issue for Coupang: despite reporting $12 billion in revenue for 2020, the company reported a loss of approximately $475,000 and negative free cash flow for the trailing twelve-month period ended September 30, 2020.

It’s likely the company will need to issue follow-on shares to fund its growth ambitions, which will hurt owners.

Finally, in the event shareholders disagree with the growth strategy and direction of the company they have little recourse. Like many technology companies (Google and Facebook, among others), Coupang has a dual-class voting structure, which gives founder Bom Kim considerable power over all other shareholders.

When Can I Buy Coupang Stock?

Coupang has filed its public registration statement, or S1, with the Securities and Exchange Commission. The next steps are heavily regulated and monitored to ensure the protection of all investors.

Typically, investment bankers are reaching out to accredited investors, those meeting a wealth test of $1,000,000 (excluding primary residence) or those meeting an income test of $200,000 a year ($300,000 for married couples) for indications of interest.

However, selling shares during this process is highly regulated and restricted, so it’s unlikely non-accredited investors can acquire shares prior to the IPO.

However, you shouldn’t have to wait for long to own Coupang stock. The S1 IPO filing from Coupang has Goldman Sachs as the lead underwriter, which is more than capable of bringing this ecommerce company to market in short order.

The debut date has not been confirmed but the traditional IPO timeline points to a possible mid-year debut.

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Coupang Stock: Who Owns It Now?

Non-accredited investors are not allowed to buy Coupang’s stock until the IPO. The company has performed the disclosures required by the IPO, but questions remain. Additionally, once the stock goes public the ownership structure will significantly change.

What we do know is Coupang has a high-profile backer: Masayoshi Son, chairman and CEO of Japanese conglomerate SoftBank Group. Son has been an influential force in venture capital, most famously by redefining the late-stage funding round.

Son’s SoftBank Vision fund has been criticized for pouring money into mega-unicorns at high valuations, setting these companies’ stocks on a path to underperform in the public markets even with strong execution. However, SoftBank has been influential in bringing quite a few strong IPOs to market, most notably Alibaba and Uber Technologies.

Coupang is a mega-unicorn: its last capital raise in November 2018 was entirely from SoftBank’s Vision Fund at a $9 billion post-money valuation.

Coupang acquired an enviable list of venture capital backers including BlackRock Private Equity and Sequoia Capital, all of which invested prior to SoftBank becoming the sole funding source in 2015. With a high-profile funding roster like this, it’s understandable many retail investors are clamoring to buy Coupang stock once the IPO occurs.

Coupang Stock Value: How Much Is It Now?

As a private company, Coupang does not have to provide information related to its stock price and funding rounds. Additionally, valuation metrics and share prices change every investment round, and when Coupang stock goes public its price will be higher than the current price.

That said, because Coupang is a high-interest company there have been press releases with high-level information on funding rounds.

The table below includes money raised by round, notable investors, and valuation (if disclosed). According to public sources, Coupang had taken nearly $3.4 billion of outside funding and was valued at nearly $9 billion as of its last funding round.

Date Notable Investor Amount Raised Valuation
March 2011 Maverick Capital $18 million Undisclosed
May 2014 Sequoia Capital; SoftBank Capital $100 million Undisclosed
December 2014 Wellington Management; BlackRock Private Equity $300 million Undisclosed
June 2015 SoftBank Capital $1 billion Undisclosed
November 2018 SoftBank Vision Fund $2 billion $9 billion
Total Raised $3.4 billion

Data from Craft.

Share pricing has not been finalized for Coupang stock’s IPO, but Coupang is attempting to raise at a total valuation of $50 billion, a 455% increase over the November 2018 funding round.

What is Coupang’s Stock Symbol?

Only publicly-traded companies on stock exchanges have ticker symbols, like the New York Stock Exchange (NYSE) or the NASDAQ exchange. This is on account of branding purposes.

That said, we know what Coupang’s stock symbol will most likely be. In the IPO registration filing the company noted they have applied to list Coupang stock on the NYSE under the symbol CPNG. Barring any unforeseen issues, Coupang’s stock symbol will be CPNG once it hits the public markets.

Coupang chose to list on the NYSE instead of the NASDAQ or in its home country. In recent years, it’s become customary for foreign companies to list in the United States to take advantage of the liquidity and trading volume of our large exchanges.

Technology companies in the ecommerce industry – Amazon and MercadoLibre — often list on the NASDAQ. However, Asian-domiciled stock issuers like Alibaba, Nio, and Sea Limited have chosen to list on the more established NYSE.

Coupang: 3 Facts From its S1 You Need to Know

  • 5X growth in three years: In the first quarter of 2018 Coupang recorded less than $1 billion in revenue, today its revenue stands at $3.8 billion.
  • Dawn delivery: Coupang has built a promise that grocery orders received before midnight will be received by 7 AM. This level of service is hard to replicate.
  • 70% of the population within 7 miles: South Korea has a smaller area than Mississippi, yet has a larger population than any state in America. The bottom line: this country is insanely dense. This density means that Coupang has distribution centers near the majority of its population. Having this ability ot serve its top customers should only embolden Coupang’s competetive advantage in the years to come.

Coupang Stock: Should You Buy the IPO?

Despite speculation that Coupang was going to be an expensive stock, valuations appear not to be unreasonable when compared to other ecommerce companies.

Coupang’s audited financial statements that accompanied its IPO registration filing reported sales of nearly $12 billion and, according to reports, Coupang is asking for an initial valuation of $50 billion, meaning shares are coming to market at a price-to-sales ratio of 4.2 times.

Coupang is cheaper than all foreign ecommerce stocks and trails only Amazon, despite being only a fraction of its market capitalization. For a company growing its top-line 91a%, shares appear to be reasonably valued when considering the opportunity.

Company Sales (B/ttm) Market Cap (B) P/S Ratio
Coupang $12 $50 4.2
MercadoLibre $3.3 $87 26.4
Sea Limited $3.6 $127 35.2
Alibaba $98.7 $700 7.1
Amazon $386 $1,596 4.1
Jumia $0.172 $4 25.6

On the other hand, investors pay for earnings and cash flow and, despite the strong top-line growth, Coupang reported a net loss and negative cash flow in 2020.

The company will eventually have to show profitable growth. It appears to be working toward profitability as it has narrowed its net loss to common unitholders from over $1 billion in 2018 to $568 thousand in 2020.

Future investments in logistics and new services will continue to weigh on cash flow and profitability in a low-margin business. Additionally, Coupang faces competition from Amazon and other ecommerce providers that will likely limit its ability to raise prices on its private label products or logistical support solutions for third-party merchants.

However, Coupang is well-situated to provide decades of growth in its home country and is looking to move into new markets. Coupang stock might never be “the next Amazon,” but it doesn’t have to be to pay off for investors. It’s understandable why investors are watching Coupang stock’s IPO closely.

Frequently Asked Questions

Is Coupang Publicly Traded?

As of March 1, 2021, Coupang stock is NOT public. However, the company has filed its S-1 IPO registration statement and is expected to IPO in early 2021.

How much is Coupang Worth?

According to reports, Coupang is fetching a value of $50 billion at the time of its IPO.

How can I buy Coupang stock?

At this point, non-accredited investors are unable to buy stock in Coupang.

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