What you need to know about the Coupang IPO
It is said that: “you can’t have your cake and eat it too.” Well, Coupang wants you to have your cake, eat it and lick the plate. The South Korean e-commerce giant will be going public on the New York Stock Exchange on March 10th, 2021.
The company’s founder Bom Kim wants his customers to “have it all”: great service, low prices and a large selection of goods.
But it doesn’t end there.
The company wants its customers to receive all products by the following morning. It ships with eco-bags collected for reuse after each delivery, preventing clutter of cardboxes in the house, and its no hassle return policy provides consumer confidence and the ability to return goods without leaving their house. The goal, as Kim writes, is for customers to ask themselves how they ever lived without Coupang.
It’s an ambitious, and almost utopian vision, where people can have just about everything they want on demand.
What is Coupang?
Coupang is considered the “South Korean Amazon.” While both are e-commerce giants, Amazon has dominated the US and international markets, whereas Coupang only operates in South Korea and has fended off Amazon on its home turf. There are some differences, one of them being delivery speed and that Coupang has built its own delivery infrastructure as opposed to Amazon which uses the United States Postal Service and UPS for its deliveries. Another difference is the ease with which Coupang allows for returns.
Coupang operates in a country whose size is 1% of the United States. Operating in a smaller country with high population density has allowed Coupang to build an infrastructure where 70% of the population is within seven miles of a distribution centre.
Is Coupang profitable
Financial data provided in the SEC filing show that Coupang’s total net revenue jumped from $1.6 billion in 2016 to $4 billion in 2018 and tripled to just under $12 billion in 2020. The company’s net loss in 2018 was almost $1.1 billion dollars, but it succeeded in cutting its losses to $700 million in 2019 and slashing it further to $475 million in 2020.
Coupang’s customer base grew from 11.8 million in 2019 to 14.8 million by the end of 2020, a 25.9% increase. With a population of 52 million people in South korea, this suggests that Coupang has ample room to grow.
Who are the stakeholders in the company?
The major investors in the company are Japan’s SoftBank, Greenoaks Capital Partners, Maverick Holdings and Rosa Park Advisors. Other investors include BlackRock and Ridd Investments.
According to the SEC filing, Founder of the company Bon Kim will control 76.7% of the company, SoftBank Vision Fund will have 8.6%, Greenoaks Capital Partners 4.3%, Maverick Holdings 1.7%, and Rosa Park Advisors will hold 1.3%.
How much is Coupang worth?
The IPO share price will be set at between $27-$30 and 120 million shares will be offered, raising almost $3.6 billion in capital for the company. Coupang has a total of 1.7 billion shares, giving the company a valuation of between $46-51 billion, a major increase from the $9 billion valuation after its last round of funding in 2018.
Risks involved with Coupang
A few risks are cited in the company’s filing.
- The company admits that it has a history of net losses and that its operating costs will expand in the future. It is unclear if the company will be able to increase revenue and become profitable.
- Coupang faces intense competition from other e-commerce sites as well as offline competition in the form of traditional retailers, department stores, and low cost warehouses, to name a few. And the competition is expected to intensify.
- A portion of its sales is from products imported to South Korea at low costs. Disruption in that process, be it from international trade regulations, tariffs or government obstacles would adversely affect the company’s ability to provide consumers with goods in a timely, cost-efficient manner.
- The retail industry has a high level of uncertainty due to regulations and industry standards and, therefore, the business model continues to change. The ability to predict future growth is difficult.
Purchasing Coupang stock on eToro
- Go to the Coupang stock page by either typing in Coupang or its symbol CPNG in the search box at the top of the page.
- Click on the “Trade” button.
- Choose whether to BUY (go long) or SELL (go short) the stock. Buying the stock means you expect value to increase. Selling the stock means you expect the stock’s value to decrease.
- Insert your preferred leverage, and Stop Loss and Take Profit points.
Important reminder: long, non-leveraged positions incur $0 commission on eToro.
- Click on the “Open Trade” button.
Zero commission means that no broker fee will be charged when opening or closing the position and does not apply to short or leveraged positions. Other fees may apply. Your capital is at risk.
For more information, visit stocks.eToro.com
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