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The more I learn about
Coupang,
more i want to move to seoul.
South Korea’s largest e-commerce company Coupang (Symbol: CPNG) went public last week in spectacular fashion. It now ranks second among the country’s public enterprises, behind only
Samsung electronics.
It was the largest initial public offering in the United States by a foreign issuer since
Alibaba Holding Group
in 2014, and the biggest new American issue of any kind since
Uber Technologies
in 2019.
Founded in 2010 by Harvard Business School dropout 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
more Instacart,
ByDash,
and
Netflix.
Coupang has around 50,000 employees and plans to hire an additional 50,000 Koreans by 2025.
Coupang may be like Amazon, but it has significant geographic advantages. South Korea is a highly populated, ultra-tech-savvy country with over 50 million people. Eric Kim, who served on Coupang’s board from 2011 to 2017 when he was managing director of Maverick Capital, an investor in the company, notes that South Korea has roughly the same land mass as Indiana, but nearly 10 times the population. Take out the uninhabitable mountainous areas, he adds, and all of these people are stuck in an area the size of Rhode Island.
This high density helps make Coupang super responsive. The company has 25 million square feet of warehouse space, spread over 100 locations in more than 30 cities. Coupang claims that 70% of Koreans live within seven miles of one of its distribution centers. Almost anything can be ordered same day, and “dawn delivery” ensures that goods ordered before midnight are delivered by 7am.
Coupang also eliminated the need for cardboard boxes and bubble wrap for 75% of deliveries. (Let’s see you do that, Amazon.) Coupang Fresh, the company’s market-leading online grocery service, ships goods in reusable containers – leave them at the door and they’re whisked away by one. of Coupang’s 15,000 deliverers to be reused. Return of goods? Leave them outside your door – no special packaging or printed labels required.
Coupang achieved $ 12 billion in revenue in 2020, up 91% from the previous year, with the pandemic helping accelerate growth to 55% in 2019 and 69% in 2018. The growth has been over 90% in each of the last four quarters.
Although not yet profitable, the company is getting closer. Coupang’s profit margin, measured by adjusted earnings before interest, taxes, depreciation and amortization, was minus 2.1% last year, compared to minus 8.8% the year before. And that reflects some unusual costs to protect workers from the pandemic.
During the IPO, Coupang sold 130 million shares at $ 35 each. The stock was opened at $ 63.50, giving the company a market cap of $ 114 billion. The stock then drifted lower, closing Thursday at just under $ 50 a share, for a valuation of just under $ 90 billion.
Coupang stocks don’t come cheap –
eBay
(EBAY) has comparable revenues and less than half of market capitalization. And the stock is trading at a slight premium to Alibaba (BABA) based on 12-month sales. But Coupang has distinct advantages. Alibaba faces stiff competition from companies like 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 a close relationship with
SoftBank Group
(SFTBY) – the Japanese holding company is the largest investor in the two companies.
SoftBank invested $ 700 million in Coupang in 2015. In 2018, SoftBank Vision Fund, the company’s $ 100 billion venture capital portfolio founded in 2016, invested an additional $ 2 billion in a transaction led by Lydia Jett, a Vision Fund executive who now sits on Coupang’s board of directors. . The initial investment was transferred to the Vision Fund, for a total bet of $ 2.7 billion. This stake is now worth $ 30 billion. It’s a monster victory – and perhaps the biggest exit ever for a deal led by a female venture capitalist.
SoftBank did not sell any shares in the offering, and 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 its initial investment, SoftBank remains Alibaba’s largest holder.
“We are prepared to hold Coupang for the long term,” 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 countries in the world, has played such a small role in the US stock market. Coupang was the first Korean tech company to go public here in over a decade. Jay Ritter, a professor at the University of Florida School of Business who studies the IPO market, says only six Korean tech companies have gone public in the US market, all from 1999 to 2006. This list includes in fact Gmarket, an e-commerce company that went public. in 2006 and was acquired by eBay for $ 1.2 billion in 2009. EBay announced that it was seeking a buyer for its Korean business. None of the best-known Korean tech and manufacturing companies – Samsung,
LG,
Hyundai engine,
This,
SK Hynix
“Have American lists.
Jett believes the Coupang deal will be a turning point for the Korean venture capital market. She says there has been a misconception that Korean tech companies weren’t innovative enough. “This door has now been ripped off,” she said. “This will transform the way Korean companies are financed. This is just the beginning.”
Write to Eric J. Savitz at [email protected]
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