Coupang set to go public on the NYSE. Strategist says investors should carefully examine the company

Korean e-commerce firm Coupang has announced its plan to debut on the New York Stock Exchange under the symbol “CPNG”.

Coupang is the largest e-commerce company in South Korea and a rival to Amazon (AMZN) and Alibaba (BABA). The company said it will sell 130 million shares at $35 a share, totaling $4.55 billion which will raise its value to $60 billion. This will make Coupang the largest initial public offering in the U.S. this year and one of the top listings of all time, by deal size.

While the Coupang stock market debut is much anticipated among investors, Daniel Yoo, strategist and head of global asset allocation at Yuanta Securities, Korea, advises investors to carefully consider if the company has what it takes to be profitable for clients.

“What you really need to know is whether or not, in the business environment of Korea and e-commerce, can they be able to generate a huge, profitable return on capital,” Yoo told CNBC on Thursday.

Yoo said the main reason that caused the increase in Coupang’s valuation and IPO price is likely because the company is the only e-commerce company in South Korea that performed well in the market last year. The company’s market size rose to 24.6% last year from 18.1% in 2019, due to the Covid-19 pandemic.

“Most of the other competitors really did not show any type of changes in terms of market share,” Yoo said. “The fact is that (Coupang is) becoming the biggest e-commerce business within Korea and 24 percent market share, I think, it might actually even rise further.”

Korea is considered to be one of the world’s fastest-growing e-commerce markets. In 2019, the total e-commerce spending in the country was $128 billion and is expected to grow to $296 billion by 2024, according to the Coupang IPO filing.

The Korean e-commerce giant has an A-list of investors including Japan’s Softbank Group, venture capital firm Sequoia Capital, BlackRock, and billionaire investor Bill Ackman.

IPO research and advisory firm IPO Boutique said the Coupang IPO is “multiple times oversubscribed,” that is, the demand for shares among institutional investors is higher than the number of shares available.

Coupang reported revenue of $11.9 billion, last year, up 72% from the same period a year ago. Although the reported a net loss of $477.6 million, it is an improvement from the net loss of $699 million in 2019.

The company said it had approximately 14.8 million active customers at the end of December 2020. It also had about 50,000 employees. Goldman Sachs, JPMorgan, and Allen & Co. are the lead underwriters of the Coupang IPO.

Yoo said the consumer market in South Korea is significantly lower than the markets in the U.S. and China. Although Coupang can increase its market share, Yoo said the company is unlikely to see the same kind of sales growth its other two rivals saw in the last decade.

About Coupang

Coupang is a South Korean e-commerce company founded by Korean-American Billionaire Bom Suk Kim in 2010. It has its headquarters in Seoul. The company has more than 100 fulfilment and logistics centers in over 30 cities. It also employs 15,000 drivers in South Korea for its delivery services in other areas including food and grocery delivery.

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