Logos on the facade at the joint headquarters of Internet company Coupang and security company SentinelOne in the Silicon Valley, city of Mountain View, California, October 28, 2018.
Smith Collection | Gado | Archive photos | Getty Images
Investors looking to buy shares in South Korean e-commerce company Coupang When it goes public in New York, one should ask whether the company has what it takes to be profitable in the future.
That’s the advice Daniel Yoo, head of global asset allocation at Yuanta Securities in Korea, gives clients.
“What you really need to know is whether or not in Korea’s business environment and e-commerce, can they be able to generate a huge and profitable return on capital,” Yoo said Thursday. on CNBC. “Street signs in Asia. “
Coupang is expected to debut on the New York Stock Exchange under the symbol “CPNG” later today when US markets open.
The company said it had priced at 130 million shares at $ 35 each, raising $ 4.55 billion and valuing the company at around $ 60 billion. This makes Coupang the largest IPO in the United States this year and one of the Top 25 Biggest Ads Of All Time In The United States, By Transaction Size.
The price is also higher than the most recent company price expected scope between $ 32 and $ 34 per share.
Yoo explained that the IPO’s valuation and price likely increased because Coupang is the only e-commerce company in South Korea to have seen a huge gain in market share last year. He said the size of its market had grown from 18.1% in 2019 to around 24.6% last year due to the coronavirus pandemic.
“Most of the other competitors haven’t really shown any kind of change in terms of market share,” he said. Coupang’s rivals include eBay-owned Gmarket, WeMakePrice, Naver Shopping, among others.
“The point is that (Coupang is) emerging as the biggest e-commerce company in Korea, and its 24% market share, I think, might even increase further,” Yoo said. “It is possible that they could earn up to 30% + over the next few years.” This, he explained, would justify why the company’s IPO price rose.
Coupang’s regulatory filing showed the company had suffered losses in eight quarters through December 31. But a sharp increase in sales last year reduced net losses from $ 770.2 million in 2019 to $ 567.6 million in 2020.
But Yoo said consumer markets in the United States and China are significantly larger than those in South Korea. So even though Coupang is able to increase its market share, he said it was unlikely to see the same kind of sales growth that the other two companies have experienced over the past decade.
South Korea’s e-commerce market is estimated to be worth $ 90.1 billion in 2020 with an annual growth rate of 22.3 percent, according to data analysis firm GlobalData. This is expected to increase at a compound annual rate of 12% to reach $ 141.8 billion in 2024.
According to Yoo, spending some of the proceeds from its IPO to build a strong distribution platform in Korea could benefit Coupang.
The e-commerce company was founded by Korean-American billionaire Bom Suk Kim in 2010 and is headquartered in Seoul. It has more than 100 distribution and logistics centers in more than 30 cities that provide next day delivery for orders placed before midnight. Coupang employs 15,000 drivers in South Korea for its deliveries and has branched out into other services such as food and grocery delivery.