Coupang LLC (NYSE:CPNG), South Korea’s biggest eCommerce group is primed to launch an initial public offering that’s set to be the biggest of its kind from a foreign company in the US since Alibaba (NYSE:BABA) made its debut in 2014. With March 10th or 11th rumoured to be the date that the Asian firm goes public, could this represent a unique opportunity for foreign market investors?
The news of the IPO comes off the back of Coupang announcing that it had seen a 91% rise in net revenue to $12bn across 2020 despite the disruptive influence of the COVID-19 pandemic. Operating losses across the same period amounted to $527m, while the firm recorded losses of $643m and over $1bn in 2019 and 2018 respectively, according to a recent filing.
With its IPO, Coupang is aiming for a market valuation of over $50bn following its listing on the New York Stock Exchange. Currently, Softbank Group Corp. (T:9984)’s Vision Fund is one of the company’s largest investors, having purchased a $2bn slice of Coupang back in 2018 at a $9bn valuation at the time, including the invested capital. 
(Image: SEC.gov)
Although Coupang has shown consistent growth since it was founded in 2010, the retail giants experienced accelerated levels of revenue as the Coronavirus pandemic forced more individuals to socially distance and operate from home.
The upcoming IPO is set to occur at a time when Coupang appears to be going from strength to strength as South Korea’s answer to Amazon (NASDAQ:AMZN), but can it really live to fill its $50bn shoes?
Let’s look at what going public could mean for the eCommerce giants
Coupang’s Initial Public Offering would be the fourth-biggest listing on record from an Asian company on a US exchange - and the largest since Alibaba Group Holding Ltd’s $25 billion IPO in 2014, according to Bloomberg data.
Coupang is offering 100 million new Class A shares in its IPO, and 20 million shares are being offloaded by pre-existing investors. Every Class A share is entitled to one vote, while Class B shares held by Coupang’s founder are entitled to 29 votes.
In this dynamic, Coupang’s founder and CEO, Bom Kim will hold around 76.7% of the voting power at the company upon the completion of the listing.
(Image: Maeil Business News Korea)
Under Kim’s guidance, Coupang has grown to command a significant share of South Korea’s online retail market - an impressive feat considering that the company was actually ranked third in terms of market share in early 2019. The IPO may indicate Kim’s intentions of realizing the potential of new markets beyond eastern Asia in the near future.
Coupang’s Profitable Network is Ready to go International
Coupang operates in the fourth-largest economy in Asia and the 12th largest globally - an economy with a GDP of around $1.6 trillion and a GDP per capita of $31,847. In South Korea, citizens spent $470 billion on retail, grocery, consumer foodservice, and travel in 2019, with this figure expected to rise to $534 billion by 2024. Total domestic eCommerce spend was $128 billion in 2019 - with the figure expected to grow to $206 billion by 2024.
South Korea’s eCommerce market represents a significant starting point for sustainable growth, and Coupang’s recent movements mean that it’s well placed to dominate in the foreseeable future.
Listing on the markets and raising upwards of tens of billions of dollars will play a significant role in Coupang’s strategic expansion and may help the company to achieve economies of scale while also growing the value of its network.
Sandy Shen, a digital commerce research director at Gartner in Shanghai, believes that Coupang’s IPO may play a pivotal role in broadening the company’s network, but that “it would depend on whether the next market has a strong existing player. If they went to the United States, they’d find Amazon across the whole market.”
Although Coupang has some work to do in order to catch up with Amazon, it’s worth noting when looking at the company’s respective lack of profits that it sits in a similar position to Amazon when its revenues were growing without much money being made from the company’s sustained growth within US retail. While Coupang may still be some years away from turning profits, the narrowing of its net losses in recent years is an encouraging sign of the company’s long-term sustainability and existing network strength.
Could a $50bn Valuation Soon Become $100bn?
Given Coupang’s performance over the past 12 months, there’s much market optimism that the eCommerce giant could outperform its valuation over the coming months and years.
In listing Coupang’s IPO for prospective participants, Freedom Holding Corp (FRHC) acknowledges that despite its $27-$30 price tag for shares, the rapid growth of South Korea’s online retail market has occurred at a time when the company’s delivery app became the most popular download on the Google (NASDAQ:GOOGL) Play Store - indicating that as the country became more used to on-demand service during the pandemic, Coupang was best placed to facilitate this growing requirement. The IPO is rumoured to take place on March 10th or 11th.
Motley Fool contributor Danny Vena was buoyant about Coupang’s potential for growth. Citing the triple-digit growth of MercadoLibre (NASDAQ:MELI), a similar eCommerce company in the developing world, Vena claimed that “eCommerce is on a hot streak.”
“What you're going to see is, I think Coupang is going to come to market, there's going to be a ridiculous amount of demand. You're saying that they're shooting for $50 billion valuation? It's probably going to be $75 billion before the IPO kicks off.” Vena explained. “Then on the first day of trading, it might get to $100 billion then.”
Despite the influence of global industry leaders Amazon over much of the world’s eCommerce markets, Coupang has taken little over a decade to establish itself as a leader in South Korean online retail. Packed with a history of strategic growth and the ambition to break into new markets, it’s little surprise that Coupang is the hottest foreign IPO to come to market since Alibaba (BABA).