Coupang stocks face doubts as insiders seek divestments

Coupang's logo is seen on an electronic signboard in New York, March 11. Courtesy of Coupang

By Park Jae-hyuk

Questions are rising among domestic retail investors over the valuation of Coupang stocks after the e-commerce firm's majority shareholders and employees began to unload their shares within a week after its Wall Street debut.

Korean retail investors snapped up $33.9 million worth of Coupang shares last week, on the day of the company's listing on the New York Stock Exchange. Retail investors have been advised to be cautious about possible fluctuations in the stock price.

Starting this Thursday, Coupang's nonexecutive employees are able to sell 34 million shares worth around $1.7 billion, accounting for 4.8 percent of the company's total outstanding stocks.

Although Coupang's lockup regulation does not allow majority shareholders or employees to sell their stocks for 180 days after the initial public offering (IPO), an exceptional clause enables employees to sell their stocks six trading days after the IPO, if the stock closes at the same as its offering price of $35 or above on the third day of trading. The requirement was fulfilled on Monday as the stock closed at $50.45.

Most Coupang employees are expected to seek divestments this week to make larger profits before the stock price goes down. According to industry officials, employees could purchase the company's stocks for below $2 per share.

“Coupang has high growth potential, but there exists concerns over its valuation,” Mirae Asset Daewoo analyst Kim Myung-joo said. “To justify its valuation and seek a further rise in its stock price, the company should occupy an oligopolistic market share that enables larger influence over portal sites.”

More Coupang shares could flood the market next week because existing registered big investors ― except for founder Kim Bom-suk ― will be able to sell up to a third of their stocks starting 12 days after the IPO, as long as the stock closes at $46.55 or above consistently over the first 10 days. Until Wednesday, Coupang's closing price has not fallen below $47.13.

Kim already sold his 1.2 million class A common shares for $42 million, Monday, after converting the same amount of class B shares with 29 times more voting rights to class A ones that can be sold on the floor. Despite the divestment, his voting rights decreased only slightly to 76.2 percent from 76.7 percent.

On the same day, U.S. billionaire Bill Ackman, one of the early investors in Coupang, tweeted that he donated 26.5 million Coupang shares that were worth $1.3 billion at that time. The founder of Pershing Square Capital Management said he donated the shares to the Pershing Square Foundation, a donor-advised fund, and another non-profit group.

“I was a very fortunate day one investor in Coupang,” he wrote on Twitter. “Thank you to Bom and the Coupang team on behalf of all of us!”

Amid growing concerns over divestments by insiders, Coupang's stock price fell over 30 percent from its peak of $69 to $47.13 on Wednesday. The firm's market cap also fell below 100 trillion won ($88 billion).