Coupang's IPO still looking uncertain

A Coupang vehicle is driven down a road in Seoul in this 2020 file photo. / Courtesy of Coupang

By Kim Jae-heun

Chairman Masayoshi Son's SoftBank is preparing to list six companies that it is the major investor in and holds managing rights to this year, and according to media reports last week, Coupang will be the first. However, whether its initial public offering (IPO) on the Nasdaq will be successful or not is still questionable.

Son appears to believe e-commerce firm has a good chance of attracting other investors because of its continuously growing corporate value, estimated at 33 trillion won ($30.2 billion) currently. Coupang's value has increased six-fold since 2015 when SoftBank first invested in the company through its venture capital fund Vision Fund.

Coupang's business performance has, however, showed mixed results with regards to growth.

The biggest risk to a successful IPO is the numbers. Coupang has not reported a profit since 2014 ― its losses totaled 3.7 trillion won up to 2019 and last year's figures also show losses of between 600 billion won to 1 trillion won.

All this is due to aggressive spending on business expansion, according to industry officials.

Coupang continues to build distribution centers to make its overnight delivery service possible, and is hiring workers to cope with the increase in online purchases. But it is also charging lower prices than standard retailers to attract customers.

Another risk factor is that it has failed to attract any foreign investment since SoftBank provided it with financial assistance back in 2018. Loans with sales bonds as collateral have increased since then.

Coupang had 990 billion won of cash-equivalent assets left as of end of 2019, and so when factoring in its losses the company is capitally-impaired. To prevent a possible bankruptcy in two years, shareholders have to agree to a free capital reduction, or management has to attract a new, sizable outside investment.

Son already has a failed IPO with WeWork ,in which he invested 10 trillion won. WeWork failed to go public on the Nasdaq due to its shaky business model that resulted in losses. Its heavy dependence on the local market is also cited as another Coupang weakness.