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IPOs

Coupang soars 41% on US trading debut

By Mar 12, 2021 (Gmt+09:00)

Coupang soars 41% on US trading debut


South Korea's Coupang Corp. made its trading debut in New York on Thursday, with shares rocketing 41% from their $35 opening price to close at $49.25.

Coupang raised a more-than-expected $4.6 billion from the initial public offering.
 
The IPO, which its founder and Chief Executive Kim Bom-suk likened to being first at bat in the Major League, made it the first South Korean company to list directly on the New York Stock Exchange.

Coupang, 39.4% owned by SoftBank Vision Fund, had priced its shares slightly above the $32-$34 price band. The IPO valued the country's second-largest e-commerce platform at $63 billion, above earlier market projections of $50 billion. 

The Korean e-commerce giant floated 130 million Class-A common shares, much more than its initially planned 120 million shares. 

By market value, Coupang is now South Korea's third-largest company, trailing only Samsung Electronics Co. with 490 trillion won ($432 billion) and SK Hynix Inc. with 99 trillion won.

Coupang soars 41% on US trading debut

Coupang was founded by Harvard University graduate Kim Bom-suk in 2010 with capital of 3 billion won ($2.7 million). It started as a social commerce company that connected buyers to make group purchases at lower prices. Now it is the world's only e-commerce platform to have introduced same-day delivery service nationwide, following heavy spending on logistics centers that currently measure 2.3 million square meters in total.

Coupang has parallels with Amazon.com, which it benchmarked in its early years, and with Ocado of the UK, in that the three companies can be categorized as not only retailers but also big data companies, said Cha Sang-kyun, dean of Seoul National University's graduate school of data science.

Behind its rise to the market-leading position was Coupang founder Kim's efforts to hire world-class developers and data experts. In the winter of 2013, in the company's third year of business, he flew to Silicon Valley with Park Daejun, one of its current representative directors, to look for American developers.

Coupang founder and CEO Kim Bom-suk
Coupang founder and CEO Kim Bom-suk

In April 2014, Coupang acquired US technology startup Calm Sea, which analyzed internet users and built data to provide tailored shopping recommendations using artificial intelligence. At the time, it appointed Calm Sea CEO James Dai as Coupang's chief technology officer. The acquisition provided a foundation for Coupang to transform into a data-based e-commerce platform.

In the same year, Coupang received $400 million in funding: $300 million from a consortium led by BlackRock and $100 million from California-based venture capital firm Sequoia Capital. In 2015, Coupang raised $1 billion from a new share sale to SoftBank.

"There was no company such as Coupang in Korea that systematically accumulated data and utilized it," said Seoul National University's Cha.

"Coupang has thousands of IT experts from global IT companies such as Amazon, Alibaba and Uber, as well as Samsung and LG," said an investment banker. "The market thinks highly of Coupang's ability to build a big platform based on AI and data on which it can place whatever it wants, as did Amazon's Jeff Bezos."

Also, Coupang broke away from the traditional logistics management system in which retailers collected all goods in their central, large logistics centers and distributed them. Coupang chose to build fulfillment centers near residential areas across the country to save delivery time.

The IPO proceeds will enable Coupang to sharpen its competitive edge to better compete with Korea's online platform behemoths Naver Corp. and Kakao Corp., as well as eBay Korea currently up for sale.

In its application for the IPO filed last month, Coupang said it will spend $870 million on building seven fulfillment centers in South Korea within the next few years.

VALUATION

The IPO price of $35 per share represents 3.7 times its 2021 forecast sales, in line with the valuations of global e-commerce giants, according to NH Investment & Securities. Amazon.com is traded at 3.3 times projected sales, eBay at 3.2 times and Alibaba at 6 times.

Coupang soars 41% on US trading debut

Considering Coupang's growth potential given the enormous IPO proceeds, its shares may have further upside potential, said NH Investment's analyst Lee Ji-young. 

"If Coupang puts the IPO money into expanding logistics centers, building big data and hiring talent, it will erode competitors' market share at a rapid pace," Lee added.

According to a report by US venture capital firm Goodwater Capital, Coupang has expanded its presence in South Korea's e-commerce market, accounting for 24.6% in 2020, versus 18.1% in 2019. Last year, Coupang's customers spent 346% more money on its platform than they did in 2017.

But some industry observers draw a distinction between Amazon and loss-making Coupang.

"Korean consumers use at least four to five online and offline channels to shop," said an e-commerce industry source. "The lock-in phenomenon, where Americans feel they cannot live without Amazon, will not happen in Korea."

Write to Dong-Hui Park and Geun-Ho Im at donghuip@hankyung.com

Yeonhee Kim edited this article.

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