Breakingviews - Coupang's next delivery: better disclosures

FILE PHOTO: Bom Kim, founder and CEO of Coupang, speaks during the Milken Institute's 22nd annual Global Conference in Beverly Hills, California, U.S., April 30, 2019. REUTERS/Mike Blake/File Photo - RC24RL9ME6V6

HONG KONG (Reuters Breakingviews) - Coupang’s initial public offering package is proving hard to unwrap. The South Korean e-commerce darling backed by SoftBank’s Vision Fund reckons it’s worth as much as $52 billion. It boasts heady growth and hefty losses, but metrics such as delivery costs, reported by peers like Amazon, are missing. A lack of detail on new bets also makes the price tag hard to stack up.

Founder Bom Kim has transformed his decade-old shopping outfit into the country’s largest online retailer. Winning over some 15 million shoppers, roughly 30% of South Korea’s population, with low prices and ultra-fast deliveries invites comparisons to Amazon’s Jeff Bezos. At the top of a mooted price range released on Monday, Coupang would be valued at just over 4 times 2020 revenue, in line with the U.S. goliath.

Some of the hype is justified. Coupang’s top line last year soared 91% to $12 billion. Its net loss, while still huge, has more than halved from $1 billion in 2018. And Coupang is squeezing more money out of its users.

The quality of its potential profit is hard to judge, however. While operating costs jumped 50% to $2.5 billion in 2020, the company doesn’t break out whether those relate to higher spending on deliveries, marketing or R&D.

To compare, Amazon and China’s $152 billion have high fixed costs such as warehouse leases and wages. As both have gotten bigger, they have benefited from size. For example, in the nine months to September, JD’s adjusted operating margin was 2.7%, up from 0.5% from two years earlier.

New areas of growth also get scant attention. Coupang Pay might offer more financial services but gets just two dozen mentions in the 200-page prospectus. Its new video-streaming arm isn’t referenced at all. Subscribers to Coupang’s premium membership service enjoy unlimited video access but the benefits and costs are unclear. By contrast, Amazon generated over $7 billion in subscription fees for its Prime shopping and entertainment offerings last quarter.

Kim’s stated mission is to create a world where customers wonder “How did I ever live without Coupang?” but investors should equally ask how they can live without fuller disclosure.


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