Coupang is South Korea’s Amazon.com, but maybe even better.

Text size

The more I learn

Coupang,

the more I want to move to Seoul.

The largest e-commerce company in South Korea, Coupang (ticker: CPNG), was spectacularly announced last week. It is now considered the country’s second largest publicly owned company and is only behind

Samsung Electronics.

It was the largest U.S. initial public offering since then by a foreign issuer

Alibaba Group Holding

in 2014, and the largest U.S. new edition of any kind since

Uber Technologies

in 2019.

Coupang, founded in 2010 by Harvard Business School dropout Bom Kim, has become a major 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

plus Instacart,

DoorDash,

and

Netflix.

Coupang has about 50,000 employees and expects to hire another 50,000 Koreans by 2025.

Coupang may be like Amazon, but it has important geographical advantages. South Korea is a technological, extremely dense, very populous country with more than 50 million people. Eric Kim, who served on the Coupang board from 2011 to 2017, while a managing director at Maverick Capital, an investor in the company, noted that South Korea has about the same land mass as Indiana – but almost ten times the population . Take out the uninhabitable mountain regions, he adds, and all the people are trapped in an area as large as Rhode Island.

That high density helps Coupang respond. The company has 25 million square meters of warehouse space, spread over 100 locations in more than 30 cities. Coupang says 70% of Koreans live within seven kilometers of one of its distribution centers. Almost anything can be ordered the same day, and “dawn delivery” ensures that goods ordered by midnight are delivered at 07:00

Coupang also eliminated the need for cardboard boxes and bubble wrap for 75% of deliveries. (Let’s see you do it, Amazon.) Coupang Fresh, the company’s leading online grocery service, sends goods in reusable containers – leave them on the doorstep and are taken away by one of Coupang’s 15,000 delivery staff for reuse. Return goods? Leave it outside your door – no special packaging or printed label required.

Coupang had revenue of $ 12 billion in 2020, 91% higher than the previous year, as the pandemic helped accelerate 55% growth in 2019 and 69% in 2018. Growth was above 90% in each of the last four quarters.

Although it is not yet profitable, the company is getting close. Coupang’s profit margin, measured at adjusted earnings before interest, tax, depreciation and amortization, was minus 2.1% last year, compared to minus 8.8% the previous year. And it reflects unusual costs to protect workers from the pandemic.

In the exchange, Coupang sold 130 million shares at $ 35 apiece. The stock was trading at $ 63.50, giving the company a market capitalization of $ 114 billion. The stock then fell lower and closed at just under $ 50 a share on Thursday, for a valuation of just $ 90 billion.

Coupang shares are not cheap –

eBay

(EBAY) has comparable income and less than half of the market capitalization. And the stock is trading at a slight premium against Alibaba (BABA), based on the 12-month decline. But Coupang has some clear advantages. Alibaba is facing fierce competition from companies such as Pinduoduo and

JD.com.

Alibaba’s growth rate is less than half that of Coupang. And Coupang does not let the Chinese Communist Party look over his shoulder.

One thing Alibaba and Coupang have in common is a close relationship

SoftBank Group

(SFTBY) —The Japanese holding company is the largest investor in both companies.

SoftBank invested $ 700 million in Coupang in 2015. In 2018, the SoftBank Vision Fund, the company’s $ 100 billion venture portfolio founded in 2016, invested another $ 2 billion in a transaction led by Lydia Jett, a manager of the Vision Fund, which now sits on the Coupang board. . The original investment was made in the Vision Fund for a total bet of $ 2.7 billion. The stake is now worth $ 30 billion. It’s a monster win – and possibly the biggest exit ever for a deal led by a female investor.

SoftBank did not sell any shares in the offer, and Jett said in an interview with Barron’s that the company intends to be a long-term investor, as with Alibaba. More than 20 years after the initial investment, SoftBank remains the largest single holder in Alibaba.

“We are set to keep Coupang for the long term,” says Jett. “There is still a lot of room in a $ 500 billion retail market.”

It seems strange that South Korea, one of the world’s most technologically advanced countries, has played such a small role in the US stock market. Coupang was the first Korean technology company to become known here in more than a decade. Jay Ritter, a professor of business school at the University of Florida who studies the IPO market, says that only six Korean technology companies became known in the U.S. market, all from 1999 to 2006. The list actually includes Gmarket, a e-commerce business that became known in 2006 and was acquired by eBay for $ 1.2 billion in 2009. EBay has announced that it is looking for a buyer for its Korean business. Not one of the most well-known Korean technology and manufacturing companies – Samsung,

LG,

Hyundai Motor,

Kia,

SK Hynix

—The American offers.

Jett thinks the Coupang agreement will be a turning point for the Korean venture capital market. According to her, there was a misconception that Korean technology companies were not innovative enough. “That door has been blown down now,” she says. ‘It will change how Korean companies are funded. That’s just the beginning. ”

Write to Eric J. Savitz by [email protected]