SPH, family office could see returns from US$50b Coupang IPO

Beyond e-commerce, Coupang is also a major player in on-demand delivery. PHOTO: REUTERS

SINGAPORE (THE BUSINESS TIMES) - Two Singapore-based investors of South Korean e-commerce firm Coupang - Singapore Press Holdings (SPH) and the family office of Trafigura's Asia-Pacific chief Tan Chin Hwee - could see strong returns on their investment if the SoftBank-backed firm goes through with its planned US$50 billion (S$66 billion) initial public offering (IPO).

SPH, which publishes The Straits Times and The Business Times, invested an undisclosed sum in Coupang in mid-2014 through a special purpose vehicle.

Mr Tan, who is also an independent director at SPH, is understood to have backed Coupang in its early years. He declined to disclose when and how much he invested.

According to past media reports, Coupang was valued at US$5 billion in June 2015, after SoftBank agreed to invest US$1 billion into it. Founded in 2010 by entrepreneur Kim Bom-suk, the firm has grown rapidly into a dominant e-commerce player in South Korea.

On Feb 12, Coupang filed its prospectus to go public on the New York Stock Exchange. Its expected valuation of US$50 billion could make this the largest listing by a foreign company in New York since Alibaba's 2014 IPO. This could also imply a return of more than 10 times for SPH.

Mr Julian Tan, SPH's chief of digital business, said that the investment into Coupang was made with the view that the e-commerce business model is highly disruptive.

"We already saw e-commerce as the future. If you look at our strategy at that point in time, not only did we go into Coupang, we invested in Qoo10 as well... We identified e-commerce as an area that will grow substantially over time," he said.

In 2015, SPH led a US$112 million investment round in e-commerce platform Qoo10, a joint venture between eBay and the South Korean e-commerce site that eBay had acquired, Gmarket.

When asked why SPH looked at the South Korean e-commerce market specifically with Coupang, Mr Julian Tan added: "It's also opportunistic; we saw that the Korean market was starting to grow. Digital adoption is very strong and the market is sizeable as well. There are reports saying that it's going to be one of the largest e-commerce markets in the world after the US and China."

Separately, Mr Tan Chin Hwee said that he was convinced about the company's growth potential after hearing a presentation from its founder.

"Mr Kim's first professional presentation was to my son many years back in Seoul with my family. His ability to keep a 10-year-old interested in the hour-long presentation is a testimony to his ability to think tactically and strategically. It is a rare feat for management to have both skill sets," Mr Tan Chin Hwee said.

Since then, Coupang has made "successful tactical and strategic decisions over the years", he said. These include its membership programme, which raised the cost of switching for customers, as well as its decision to build its own warehouses to maintain fulfilment standards.

"Full credit to the team and directors, such as Matthew Christensen, for tactically executing the strategic vision, despite tremendous competition from deep-pocketed rivals," he added. Mr Christensen is managing partner of venture capital firm Rose Park Advisors and has served on Coupang's board since 2010.

Market watchers have been largely optimistic about Coupang's financials, even as the company is still loss-making. In its prospectus, the firm revealed a near-doubling of total net revenue to US$12 billion for financial year 2020 ended December, while narrowing its full-year net loss of 32 per cent to US$474.9 million.

Beyond e-commerce, Coupang is also a major player in on-demand delivery, with key offerings such as Rocket Fresh, which provides same-day delivery of fresh food, and food delivery service Coupang Eats. The firm has also ventured into fintech with Coupang Pay.

In a Feb 22 report, analyst Douglas Kim, who publishes on Smartkarma, forecast that Coupang could generate a net revenue of US$16.5 billion for 2021 and US$19.9 billion for 2022.

"Coupang's strong sales growth is a testament of its ability to take away market share in Korea from other e-commerce providers and bricks-and-mortar retail shops, combined with once in a lifetime opportunity created by the Covid-19 pandemic," he said.

He added: "In our view, the sooner it is able to complete the IPO, the better it will be since this bullish IPO environment is not likely to last for an extended period of time."

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