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Coupang files for mega US IPO

Let’s dig into the South Korean e-commerce giant’s financial health

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A general view shows the warehouse of South Korean online delivery service Coupang, in Bucheon, south of Seoul, on May 27, 2020. - South Korea reported its biggest jump in coronavirus infections in seven weeks on May 27, driven by a fresh cluster at an e-commerce warehouse on Seoul's outskirts, as millions more pupils went back to school. (Photo by Ed JONES / AFP) (Photo by ED JONES/AFP via Getty Images)
Image Credits: Ed Jones (opens in a new window) / Getty Images

Earlier today, South Korean e-commerce and delivery giant Coupang filed to go public in the United States. As a private company, Coupang has raised billions, including capital from American venture capital firm Sequoia and Japanese telecom giant SoftBank and its Vision Fund.

Coupang’s offering, coming amidst the public debut of a number of well-known technology brands, will be a massive affair. Its first S-1 filing indicates that its IPO will raise capital in the range of $1 billion, far larger than the $100 million placeholder that is more common.

But the company’s scale makes its lofty IPO fundraising goals reasonable. Coupang is huge, with revenues north of $10 billion in 2020 and in improving financial health as it scales. And its revenue growth has accelerated.

Perhaps that explains why the company is reportedly targeting a valuation of $50 billion.

This afternoon, let’s dig into the company’s historical growth, its improving cash flow and its narrowing losses. Coupang’s debut will create a splash when it lands, so we owe it to ourselves to grok its numbers.

And as there are other e-commerce brands with a delivery function waiting in the wings to go public — Instacart comes to mind — how Coupang fares in its IPO matters for a good number of domestic startups and unicorns.

Coupang’s surging scale

The company’s growth across the last half-decade is impressive. Observe its yearly revenue totals from 2016 through 2020:

  • 2016: $1.67 billion.
  • 2017: $2.4 billion (+43.7%).
  • 2018: $4.05 billion (+68.8%).
  • 2019: $6.27 billion (+54.8%).
  • 2020: $11.97 billion (+90.9%).

Sure, some of that 2020 growth is COVID-19 related, but even taking that into account, Coupang’s revenue growth is nothing short of fantastic. And what’s better is that the company has cut its losses in recent years:

  • 2016: $494.4 million.
  • 2017: $617 million. ⬆︎
  • 2018: $1.1 billion. ⬆︎
  • 2019: $698.8 million. ⬇︎
  • 2020: $474.9 million. ⬇︎

Since 2018 Coupang has cut its net losses, figures that are even smaller if you are willing to allow the company adjusted metrics. Coupang’s unadjusted EBITDA losses were just $250.3 million in 2020, a slim 2.1% of its revenues. And with greater than 90% growth, no investor is going to worry too much about so slim a deficit.

Especially as that number was -24% in 2018. That’s a lot of progress made on a path to profitability in just two years.

Coupang’s cash consumption has also narrowed in recent years, with its free cash flow improving from -$787.6 million in 2018 to -$526.1 million in 2019 to -$182.6 million in 2020. Again we see a solid progression toward profits as revenue scales; this implies operating leverage and future positive cash flows from the e-commerce player.

We can see these trends at play in Coupang’s most recent quarter. The company generated $3.8 billion in revenue (run rate: $15.21 billion), and a net loss of $88 million. As the company posted effectively 100% growth in Q4 2020 over Q4 2019, its losses likely aren’t viewed by investors as material. And they are so small compared to its top line that the company is effectively running on a break-even basis.

The only question about Coupang is what its future growth looks like. The rest of the company is more than solid. That growth rate will be key in deciding what Coupang is worth as a public company.

Ownership

The company’s impending valuation is miles above its final private price. SoftBank put $2 billion into the company back in late 2018 at a $9 billion, post-money valuation. The Japanese group will print profit when Coupang does finally price and list.

Sadly the company’s S-1 filing does not break down who owns what portion of the company yet, but we can tell at this stage that the SoftBank Vision Fund, Greenoaks, Maverick Holdings and “entities affiliated with Disruptive Innovation Fund” each own more than 5% of the company.

The Vision Fund needs no introduction. Greenoaks is an SF-based investing outfit. Maverick Holdings is a U.S.-based private group that has a venture arm, and Disruptive Innovation Fund is hard to Google. More to come when we suss it out.

Thinking about public comps, Amazon is worth between 4.3x and 4.6x its sales at the moment, valuations that include its AWS cloud computing engine. At those multiples, it’s not hard to see Coupang at a valuation of around $50 billion. But if you decide that Coupang deserves a greater multiple thanks to its epic growth rates, you can quickly sketch out all sorts of larger, more interesting price points for Coupang.

More when it prices of course, but this IPO is going to be a real blast to watch.

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