Coupang IPO brings South Korea's Amazon slayer to the NYSE

  • E-commerce in Korea is growing fast, with high internet penetration and smartphone usage
  • Coupang managed to beat Amazon at its own game to become the largest e-commerce player in Korea
  • The US$1bn IPO is likely to be fully subscribed
Coupang IPO brings South Korea's Amazon slayer to the NYSE

South Korea’s e-commerce giant, Coupang, has filled for a US$1 billion IPO on the NYSE. The valuation could be US$50 billion. It is set to be the biggest foreign IPO in the US since Alibaba in 2014.  The company will be listing on the NYSE to take advantage of the dual listing option to list Class A and Class B shares.

Coupang may emerge as the fastest growing of the Baby Amazons, also know as EM Tech challengers. It was founded by its CEO Bom Suk Ki, who was educated at Harvard University.

Coupang has crushed Amazon in South Korea to become the country's largest retailer in just under a decade, and it has done this by beating Amazon at its own tactics. Coupang can deliver packages within seven hours, which is faster than Amazon.

Coupang's e-commerce business has an operational infrastructure that spans over 25 million square feet across over 30 cities, giving it a competitive edge. It now delivers 3.3mn units per day, compared to 2.2mn in 2019.

Coupang has been growing revenue at an average rate of more than 70% pa in the last three years. The revenue in Q4 20 was four times its Q1 18 revenue, while total revenue in 2020 grew by 90.8% yoy to US$12bn.

Increasing scale, improving financial health

Enticingly for investors, Coupang's financial health is improving as it grows; the business recorded a gross profit of US$2.0bn in 2020, up 92.3% from 2019.

Operating loss improved to US$0.5bn in 2020, smaller than the US$0.6bn loss in 2019, while net operating margin improved to -4.4% in 2020, from -10.3% in 2019. Similarly, cash from operating activities became positive, improving to US$0.3bn in 2020 from a negative US$0.3bn in 2019.

The pandemic-fuelled revenue growth Coupang has achieved in South Korea is superior to other Baby Amazons. Unlike emerging regions like Latam and ASEAN which are growing from a low base, South Korea has higher internet penetration and greater smartphone usage than most Western countries.

The Baby Amazon stocks recorded impressive gains in 2020. The asset class may not sustain the gains as the pandemic has brought forward revenue expectations for e-commerce by three to four years. Regardless, we expect the Coupang listing to be highly subscribed.

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