A Coupang employee unloads an organic bag carrying fresh food from a delivery truck in Bucheon, South Korea. The e-commerce company has launched its IPO.
SeongJoon Cho / Bloomberg
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The more I find out
Coupang,
the more I want to move to Seoul.
South Korea’s largest e-commerce company, Coupang (CPNG), went public this past week in a spectacular way. It now ranks as the second largest public company in the country, with only one behind
Samsung Electronics.
It was the largest initial public offering in the United States by a foreign issuer since
Participation of the Alibaba group
in 2014, and the largest number in the United States since
Uber Technologies
in 2019.
Founded in 2010 by the abandonment of Harvard Business School Bom Kim, Coupang has become a huge force in the South Korean economy. The company accounts for 4% of the country’s consumer trade, with a wide range of online retail services: Think
Amazon.com
month Instacart,
ByDash,
i
Netflix.
Coupang has about 50,000 employees and plans to hire another 50,000 Koreans by 2025.
Coupang may be like Amazon, but it has important geographic advantages. South Korea is a country with a lot of technology, super dense and very populous, with more than 50 million people. Eric Kim, who served on Coupang’s board of directors from 2011 to 2017 while CEO of Maverick Capital, the company’s investor, notes that South Korea has about the same land mass as Indiana, but nearly ten times the size of population. It adds uninhabitable mountain regions, and all of these people are jammed in an area the size of Rhode Island.
This high density helps make Coupang more sensitive. The company has 25 million square feet of storage distributed in 100 locations in more than 30 cities. Coupang says 70% of Koreans live within seven kilometers of one of their distribution centers. Almost anything can be ordered on the same day and “delivery at dawn” ensures that goods ordered at midnight are delivered at 7am
Coupang has also eliminated the need for cardboard boxes and bubble wrap for 75% of deliveries. (Let’s see, Amazon.) Coupang Fresh, the company’s market-leading online grocery service, ships goods in reusable containers. Leave them by the door and one of Coupang’s 15,000 delivery employees will bring them for you to reuse. Return of goods? Leave them outside your door; no special packaging or printed label required.
Coupang earned revenue of $ 12 billion in 2020, 91% more than the previous year, as the pandemic helped accelerate growth from 55% in 2019 and 69% in 2018. Growth was more than 90% in each of the last four quarters.
While not yet profitable, the company is approaching. Coupang’s profit margin, measured by adjusted earnings before interest, taxes, depreciation and amortization, was down 2.1% last year, from minus 8.8% the previous year. And that reflects some unusual costs to protect workers from the pandemic.
On the IPO, Coupang sold 130 million shares at $ 35 a piece. The shares opened up trading at $ 63.50, giving the company a market capitalization of $ 114 billion. Shares fell lower, closing at just under $ 50 per share on Thursday, with a valuation of $ 90 billion.
Coupang shares are not cheap—
eBay
(EBAY) has comparable income and less than half of the market capitalization. And the shares are trading at a slight premium on Alibaba (BABA) based on sales after 12 months. But Coupang has some different advantages. Alibaba faces fierce competition from companies such as Pinduoduo and
JD.com.
Alibaba’s growth rate is less than half that of Coupang. And Coupang doesn’t have the Chinese Communist Party looking over his shoulder.
One thing Alibaba and Coupang have in common is the close relationship
SoftBank Group
(SFTBY): The Japanese holding company is the main investor of the two companies.
SoftBank invested $ 700 million in Coupang in 2015. In 2018, the SoftBank Vision Fund, the $ 100 billion portfolio of the company founded in 2016, invested another $ 2 billion in a deal led by Lydia Jett, a executive of Vision Fund who is now part of Coupang’s board. The original investment was incorporated into the Vision Fund, with a total commitment of $ 2.7 billion. That stake is now worth $ 30 billion. It’s a monster victory and possibly the biggest exit ever made for a woman-led investor deal.
SoftBank did not sell any shares of the offer, and Jett says in an interview with De Barron that the company intends to be a long-term investor, as it has been with Alibaba. More than 20 years after its initial investment, SoftBank remains Alibaba’s sole largest holder.
“We’re ready to keep Coupang in the long run,” Jett says. “There’s a lot of room left in what is a $ 500 billion retail market.”
It seems strange that South Korea, one of the most technologically advanced nations in the world, has played such a small role in the U.S. stock market. Coupang was the first Korean technology company to go public here in more than a decade. Jay Ritter, a professor at a University of Florida business school studying the stock market, says only six Korean tech companies have gone public on the U.S. market, all from 1999 to 2006. This list includes reality Gmarket, an e-commerce company that went public in 2006 and was acquired by eBay for $ 1.2 trillion in 2009. EBay has announced that it is looking for a buyer for its Korean business. None of the best-known Korean manufacturing and technology companies: Samsung,
LG,
Hyundai engine,
That,
SK Hynix
—Have listings in the US.
Jett believes the Coupang deal will be a turning point for Korea’s venture capital market. She says there was a misconception that Korean tech companies were not innovative enough. “That door has already been blown up,” he says. “This will transform the way Korean companies are financed. That’s just the beginning. ”
Write to Eric J. Savitz to [email protected]