A Coupang employee loads an eco bag of fresh food from a truck in Bucheon, South Korea. The e-commerce company has launched its IPO.
SeongJoon Cho / Bloomberg
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The more I learn about it
Coupang
the more I want to move to Seoul.
South Korea’s largest e-commerce company, Coupang (ticker: CPNG), went public in spectacular fashion last week. It is now the second largest publicly traded company in the country, lagging behind only
Samsung Electronics
It was since then the largest US IPO by a foreign issuer
Alibaba Group Holding
in 2014, and the biggest US new song since
Uber Technologies
in 2019.
Founded in 2010 by Bom Kim who was an early graduate of Harvard Business School, 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
plus Instacart,
By Dash
and
Netflix
Coupang has approximately 50,000 employees and expects to hire an additional 50,000 Koreans by 2025.
Coupang may look like Amazon, but it has significant geographic advantages. South Korea is a tech-savvy, super-dense, densely populated country of over 50 million people. Eric Kim, who served on the board of Coupang from 2011 to 2017 while serving as a director at Maverick Capital, an investor in the company, notes that South Korea has about as much land as Indiana, but nearly 10 times the population. Take out the uninhabitable mountain areas, he adds, and all those people are trapped in an area the size of Rhode Island.
That high density helps make Coupang super reactive. The company has 25 million square feet of warehouse space spread over 100 locations in more than 30 cities. Coupang says 70% of Koreans live within seven miles of one of the distribution centers. Almost everything can be ordered the same day, and “early morning delivery” ensures that goods ordered before midnight are delivered before 7am.
Coupang has also eliminated the need for cartons and bubble wrap for 75% of deliveries. (Show me you do, Amazon.) Coupang Fresh, the company’s market-leading online grocery shopping service, ships goods in reusable containers – leave them at the door and they’ll be whisked away by one of Coupang’s 15,000 deliverers for reuse. Returning goods? Leave them outside your door – no special packaging or printed label required.
Coupang had sales of $ 12 billion in 2020, up 91% from the previous year as the pandemic accelerated growth from 55% in 2019 and 69% in 2018. Growth was in each of the past four quarters more than 90%.
While it’s not yet profitable, it’s getting close. Coupang’s profit margin, measured by adjusted earnings before interest, tax, depreciation and amortization, was minus 2.1% last year, versus minus 8.8% last year. And that reflects some unusual costs of protecting workers from the pandemic.
On the IPO, Coupang sold 130 million shares for $ 35 each. The shares opened for trading at $ 63.50, giving the company a market capitalization of $ 114 billion. The stock then fell, closing at just under $ 50 a share on Thursday, for a valuation of just under $ 90 billion.
Coupang shares are not cheap-
eBay
(EBAY) has comparable income and less than half the market capitalization. And the shares are trading at a slight premium over Alibaba (BABA) based on a 12-month trailing revenue. But Coupang has a number of clear 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 her shoulder.
One thing that Alibaba and Coupang have in common is a close relationship
SoftBank Group
(SFTBY) – The Japanese holding company is the largest investor in both companies.
SoftBank invested $ 700 million in Coupang in 2015. In 2018, the SoftBank Vision Fund, the company’s $ 100 billion venture capital portfolio created in 2016, invested an additional $ 2 billion in a deal led by Lydia Jett, a Vision Fund director who now serves on the board of directors of Coupang. . The original investment was rolled into the Vision Fund for a total stake of $ 2.7 billion. That stake is now worth $ 30 billion. It’s a huge win – and arguably the biggest ever exit for a deal led by a female venture investor.
SoftBank has not sold any shares in the offering, Jett said in an interview with Barron’s that the company intends to be a long-term investor, as it has been with Alibaba. More than 20 years after the initial investment, SoftBank’s remains the largest holder in Alibaba.
“We are set to hold onto Coupang for the long term,” said Jett. “There is still a lot of room left in a $ 500 billion retail market.”
It seems strange that South Korea, one of the most technologically advanced countries in the world, has played such a small role in the US stock market. Coupang was the first Korean technology company to go public here in more than a decade. Jay Ritter, a professor in the University of Florida business school who studies the IPO market, says only six Korean technology companies in the US market went public, all from 1999 to 2006. That list actually includes Gmarket, an e-commerce company that went public in 2006 and was acquired by eBay in 2009 for $ 1.2 billion. EBay has announced that it is looking for a buyer for its Korean operations. None of the best-known Korean technology and manufacturing companies – Samsung,
LG
Hyundai Motor
Which
SK Hynix
—Have listings in the US.
Jett thinks the Coupang deal will be a turning point for the venture capital market in Korea. She says there is a misconception that Korean technology companies were not innovative enough. “That door has now been blown away,” she says. “This will change the way Korean companies are funded. This is just the beginning. ”
Write to Eric J. Savitz at [email protected]