Coupang's Fascinating, Possibly Overvalued IPO

Summary

• South Korean ecommerce titan Coupang has completed an IPO which valued the company at over $60 billion on the first day of trading.
• Coupang is the largest ecommerce retailer in South Korea, but it cannot be compared exactly with Amazon and there are differences in their business models and environment.
• Coupang is growing rapidly, though there are concerns about its low profitability numbers and high valuation.
• The company does not have a true money-maker like AWS, and investors should probably pass on this company until the value drops.

The past several months has seen a boom in large, successful IPOs and South Korean company Coupang Inc. (NYSE:CPNG) is the latest example. According to Yahoo, Coupang raised $4.6 billion in its IPO on Thursday, which values the company at over $60 billion. This would make it the largest foreign IPO since Alibaba Group (NYSE:BABA) went public in 2014, and this would probably be the largest IPO of this year.

Multiple news articles like this one from Yahoo have compared Coupang to Amazon (NASDAQ:AMZN) as Coupang is another ecommerce and logistical business which has successfully competed with the tech giant in South Korea. But there are differences in the business model where Amazon has a significant advantage, and retail investors will likely have to invest at a premium given the expected IPO bump. While there are plenty of concerns, here are some of the key crucial facts to help decide.

Ecommerce in South Korea

Coupang is primarily an ecommerce platform and the largest in Korea thanks to a relentless focus on customer satisfaction, logistics, and rapid deliveries. In its S-1/A, Coupang boasts that it has "over 100 fulfillment and logistics centers in over 30 cities," as well as 15,000 drivers who deliver multiple times per day. An example of this logistical success is Coupang's Rocket Fresh delivery system. Customers who order food or groceries before midnight can expect delivery by 7 am the very next day, and 70 percent of the population lives with 7 miles of a Coupang logistics center. While this is easier to do in densely packed Korea, it remains an impressive achievement. This means that Coupang is in a better position to compete against up and comers.

But Rocket Fresh is one example of how even though Coupang is often compared to Amazon, there are real differences

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.