[IB토마토 변세영 기자] The industry evaluation of Coupang’s 1st anniversary report, which entered the US stock market under the splendid spotlight, is hot and cold. Behind the record-breaking performance of exceeding KRW 20 trillion in sales, the stock price has been cut in half due to the exit of the largest shareholder and a growing loss. In addition, concerns about the ‘sustainability’ of the company are hardly fading as a huge cash exhaustion is predicted due to increased investment in new business this year.
Based on its dominance in e-commerce, Coupang is also stepping on the accelerator for new businesses. Coupang Eats and Coupang Play, which are classified as ‘initiatives’, also produced tangible results. According to the app/retail analysis service WiseApp/Retail/Goods (WiseApp), domestic OTT ‘Coupang Play’ had 3.55 million app users as of January, a 418% increase from the previous year. From this year, Coupang plans to separate the performance of the e-commerce and initiative business groups, manage them professionally, and focus on new businesses.
Although Coupang has been reborn as the No. 1 distribution company in Korea in name and reality, the majority opinion is that it is still lacking in kernels when looking at its performance. Coupang’s operating loss last year was $1.493 billion (1.8039 trillion won), which was more than 1 trillion won compared to $515.9 million (627.2 billion won) last year. Coupang, which recorded an operating loss of 1.13 trillion won in 2018 and improved its operating loss the following year, broke the record of the largest operating loss last year again. During the same period, the accumulated loss exceeded 6.8 trillion won, with losses amounting to 1.542.59 billion dollars (1.86 trillion won).
The increase in losses was mainly due to one-off costs due to fire and expansion of investment in logistics centers. In June of last year, a fire broke out at the Deokpyeong logistics center in Coupang, which resulted in the loss of inventory, buildings and other assets at the site. For this reason, in the second quarter of last year, $158 million (192 billion won) was recognized in inventory and equipment loss, and an additional $127 million (154.4 billion won) was added in the name of general management expenses. It has not yet been stated whether insurance will be able to recover such losses.
Coupang Logistics Center. photo = Coupang
Despite adverse conditions such as large fires, Coupang maximized its investment in logistics centers. Last year, Coupang signed an MOU to invest more than 1 trillion won in regional logistics centers such as Gimcheon, Busan, and Gyeongnam. Actual cash requirements were also large. Cash used for investment activities increased from $520.65 million (632.8 billion won) in 2020 to $67552 million (821.1 billion won) last year. Coupang added infrastructure such as a 1,3935,45㎡ logistics center last year, which is larger than the combined infrastructure investment of the previous two years.
The problem is that the financial situation deteriorated rapidly as investment increased despite the increase in net loss. At the end of last year, Coupang’s cash and cash equivalents amounted to $3.487 billion (4.23 trillion won). This is a decrease of more than 1 trillion won in just a few months from $4332.8 million (5.26 trillion won) at the end of the first quarter of last year. Although it is not at the level of a cash shortage right now, Coupang is also working on loans. They borrowed $169 million (fixed interest rate 3.16%) as collateral in August last year, followed by $139 million (3.45%) in October, and $47 million (3.78%) and $23 million (3.68%) in November. , also borrowed $152 million (3.87%) in December. It is worth more than 600 billion won in 6 months. As collateral loans overlap, Coupang spent 55.1 billion won in interest expenses last year alone.
‘Cash flow from operating activities’, a representative indicator of cash generating capacity, also turned negative last year. Coupang’s operating cash flow changed from -379.2 billion won in 2019 to 366.7 billion won at the end of 2020, ahead of its listing. It is also the reason that tangible expectations for a turnaround were created at the time of the initial public offering (IPO). However, at the end of last year, the trend of the cash flow graph turned again to -499.3 billion won. This is because accrued expenses and inventories increased in the process of growing in size. For example, Coupang’s unpaid expenses increased dramatically from $50.83 million (KRW 61.8 billion) at the end of 2020 to $26.59 million (KRW 499.3 billion) last year. Coupang has set a goal of turning to black in the fourth quarter of this year, but there is a strong negative outlook that a turnaround will be difficult given that the cash flow situation is not favorable.
As the situation continues to make it difficult for the improvement in operating performance to cover the loss, the decline in the stock price is also deepening. Coupang, which debuted on the New York Stock Exchange last year with an initial public offering price of $35, was at $19.84 as of today, although its stock price soared to $69 at one point during its initial public offering. This is a 72% drop from its peak.
Successive major shareholder churn is also the basis for question marks appearing in corporate value. Japan’s SoftBank Group’s Vision Fund, which is called Coupang’s largest shareholder, sold about 10% of its stake in Coupang in September last year, and sold Coupang stock worth US$1 billion (1.128 trillion won) this month again. Greenox Capital Partners, the second largest shareholder of Coupang, also held an 18% stake in Coupang at the time of listing.
In the report, Park Jong-dae, a researcher at Hana Financial Investment, said, “(Coupang’s) differentiated top-line growth and market share increase are positive, but the continued expansion of the loss is a burden.” We need to show a business structure that can overcome the burden of new business costs by normalizing existing businesses.”
an industry official
By Byun Se-young, staff reporter seyoung@etomato.com
ⓒ Delicious News Tomato, reprinted without permission – redistribution prohibited
