Coupang is not a household name in the United States. But the company is making waves in the digital world. Keep in mind that — over the past few years — various top firms have agreed to invest in Coupang stock, which is valued at a hefty $9 billion.
The company, which is the leading e-commerce operator in South Korea, was founded by Bom Kim in 2010. At the time, he dropped out of the Harvard University MBA program because he saw a massive opportunity in the country.
In an interview with CNBC, Kim noted that “I had a belief when I was in grad school that I had a very short window to really make something that had an impact.”
Well, he certainly did not waste his time.
What Is Coupang?
Keep in mind that Coupang has undergone various pivots. For example, it initially was about capitalizing on the red-hot category of daily deals. Remember Groupon (NASDAQ:GRPN)? Well, the trend was more of a fad.
While this did get traction, Kim though there was an even better way. Yes, he would look to the Amazon (NASDAQ:AMZN) playbook. This involved heavy investments in building an extensive infrastructure distribution system. At the core of this was building Rocket Delivery, which provides direct shipments to customers.
Currently there are more than 5,000 drivers who can deliver nearly all orders within less than 24 hours.
For the most part, this strategy has proved to be spot on. It certainly helps that over 80% of South Korea’s population resides in high-density cities. Another key factor is that the citizens are adept with new technologies and that there is a sophisticated broadband infrastructure.
True, South Korea is not necessarily a large country. But there is something to keep in mind: It is one of the largest e-commerce markets in the world. And Coupang is the clear leader in the country, beating out operators like Gmarket and 11Street. Every day it delivers 3.3 million items and roughly half of the population of South Korea has downloaded the mobile app.
The pandemic has had an impact on the company. However, South Korea has done a good job of containing the virus. As for Coupang, it has retooled its supply chain and provided incentives for customers. All in all, the moves have paid off.
According to a report from Reuters, the company posted revenues of 7.2 trillion won in the first quarter, up by 64% on a year-over-year basis. The operating loss fell from 1.1 trillion won to 721 billion won during this period. The two main growth drivers have been groceries and appliances.
Should You Invest in Coupang Stock?
Coupang has certainly benefited from the boom in private investing in high-growth startups. Since inception, the company has snagged a total of $3.6 billion from tier-one investors like Sequoia Capital and BlackRock (NYSE:BLK). However, the biggest shareholder is SoftBank (OTCMKTS:SFTBY) and its Vision Fund. The total amount invested is $3 billion.
So might there be an IPO? Well, the buzz is that a deal may come next year. Then again, Coupang could accelerate those plans. The IPO market is red-hot and a myriad of other high-profile tech companies have filed, like Palantir and Airbnb. Besides, SoftBank may have urgency for an offering of Coupang since it wants to boost the returns on its fund, which have been weighed down by some major losses.
And finally, as seen with the strong performance of companies like JD.com (NASDAQ:JD), Amazon and Shopify (NYSE:SHOP), there is strong demand for e-commerce plays. In other words, the current environment is probably as good as its gets for a Coupang offering.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tom Taulli (@ttaulli) is an advisor/board member for startups and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks