Coupang's Strong Trading Debut Following Roblox

Coupang's Successful Public Offering

A new day marks the public listing of another substantial company, demonstrating strong initial performance in the stock market.

Currently, Coupang’s stock is experiencing a rise of over 46%, trading at more than $51. This is above the initial public offering (IPO) price of $35, which was itself $1 higher than the previously indicated range for the South Korean e-commerce leader.

Increasing the price range and then setting the final IPO price above it, only to witness further gains in the public markets, is becoming a common pattern among recent successful IPOs. Coupang’s debut aligns with this trend.

Analyzing Coupang's Valuation

The company’s combination of fast expansion and decreasing financial losses has resonated positively with investors. Let's examine the valuation at both the IPO price and the current market price.

We will quickly determine the company’s worth at its IPO price and its present value. Calculating revenue run rates for each valuation will also be included.

SoftBank's Returns

An assessment of SoftBank’s profits from this investment is also necessary. The investment’s trajectory exemplifies a classic inverted J-curve pattern.

Understanding the financial implications for SoftBank is crucial to fully grasping the success of Coupang’s IPO.

The strong market response indicates investor confidence in Coupang’s future growth potential and its ability to maintain a competitive edge in the e-commerce sector.

Coupang’s Initial Public Offering and Present Valuation

According to Renaissance Capital, Coupang increased its share allocation to 130 million shares, up from the initial 120 million. Consequently, the total value of both primary and secondary shares offered to the public reached $4.55 billion.

The same source determined that, at its IPO price of $35 per share, the company’s fully diluted valuation stood at $62.9 billion. Our calculations place the company’s straightforward valuation at the IPO price at $60.4 billion. Given the proximity of these figures, we will utilize the diluted valuation as a gesture of goodwill towards the company’s supporters.

Currently, Coupang’s worth is approximately $92 billion. This substantial figure is a milestone achieved by a remarkably small percentage of companies. While some organizations attain this level, it represents an exceptional outcome when considering the broader startup landscape.

The company’s IPO valuation and subsequent post-IPO performance are largely attributable to its Q4 financial results. The key data is presented below:

The most recent revenue figure, located in the upper-left portion of the image, is $3.8 billion for Q4 2020. This translates to an annualized revenue run rate of $15.2 billion. While seemingly high in relation to the company’s valuation, it’s important to note that a software company with similar revenue could command a valuation in the hundreds of billions.

Unlike software companies that often exhibit gross margins around 71%, Coupang’s gross margins in the latest quarter were 17%. This represents a decline from approximately 19% in the same quarter of the previous year, which is a concerning trend. However, investors appeared unconcerned, assigning the company a multiple of around 6x revenue.

Utilizing the company’s 2020 revenue instead of the run-rate figure results in a higher multiple of 7.5x. For context, Alibaba is currently trading at roughly 7x its trailing revenues, while Amazon’s valuation is approximately 4.2x its trailing revenues. (Data sourced from YCharts.)

Are you surprised that Coupang’s valuation, in terms of revenue multiples, exceeds that of Amazon? It’s important to remember that while Amazon Web Services (AWS), a significant Amazon division, is highly valuable, its growth is decelerating. Furthermore, the remainder of Amazon’s business isn’t experiencing exceptionally rapid expansion, contributing to its lower multiple. The question of whether Coupang’s metrics justify a valuation nearly double that of a larger, profitable competitor is a matter of individual assessment.

Coupang’s IPO was undoubtedly a success, regardless of any valuation debates. It also proved to be a substantial victory for SoftBank. The relevant figures are as follows:

• Coupang shares held by SoftBank: 568,156,413.
• Value at IPO price: $19,885,474,455.
• Value at the current price: ~$28,975,977,063.

However, what was SoftBank’s initial investment? Was it significant? Yes, but the returns have far surpassed the initial outlay. SoftBank invested a known $3 billion into the company, resulting in nearly a 10x return at current prices. This represents a considerable profit.

Considering that the SoftBank Vision Fund had a total size of approximately $100 billion, this gain accounts for around 30% of the entire fund. A noteworthy achievement for both the company and its prominent investor.

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