Korean startup Coupang likely to acquire a major stake in ‘eBay Korea’

Leading Korean E-commerce operator Coupang may acquire a major stake in eBay Korea,  according to a report in The Korea Times. Coupang is looking to announce an initial public offering (IPO) on the Nasdaq next year, and the move to buy eBay is seen as an expansion initiative by the company by analysts.

eBay Korea is the country’s largest online platform with three business units, Gmarket and eBay Auction. It reportedly generates about 16 trillion won approximately $13 billion per year in profits. The international E-commerce site entered the Korean market in 2001 by acquiring Auction CO. Ltd. for $120 million. In 2009 eBay expanded with another acquisition of competitor Gmarket for $1.2 billion. Last week, there were reports in local media about eBay looking for a potential buyer with value at about 5 trillion won or about $ 4.4 billion.

Now, Coupang is reported to be a leading buyer for eBay in Korea. As per a report released by brokerage services, Hana Daetoo Securities, Coupang’s biggest stakeholder may acquire controlling stakes in Korean subsidiary of eBay, which was up for sale, to receive more funding from investors.

“Coupang is aiming for the Nasdaq listing next year. As a necessary step in terms of expanding its market share, Coupang is expected to grow its corporate size by acquiring major stakes in eBay Korea,” Hana Daetoo Securities analyst Park Jong-dae wrote in a note to clients.

So far, Coupang has received $ 3 billion in investment from SoftBank and its Vision Fund, and its daily delivery volume has climbed from about 2.2 million per day last year to 3 million per day in mid-February.

The outbreak of the coronavirus has helped Coupang in terms of orders. However, analysts are questioning its long-term profitability as the orders are mostly for low-margin goods such as cheap household items and fresh produce.

Analysts view on Coupang listing on Nasdaq

The institutional investors weigh in on concrete plans for corporate sustainability and profit visibility, and Coupang’s not-that-impressive financial sheets are also being considered a “double-edged sword” for its plan for an IPO in the United States. In 2018, Coupang was valued at about $9 billion. It had reported 1.1 trillion won about $92 billion of operating losses as per regulatory filings. Over the past five years, Coupang has reported operating losses to about 3 trillion won approximately $250 billion. However, from the profitability point of view, Coupang has a competitive edge as its total transaction volumes as of 2018 were about 12 trillion won, which made it Korea’s largest e-commerce operator.

In what is seen as Coupang’s move to laying the groundwork for an IPO in the US, the startup appointed a former Federal Reserve Governor, Kevin Warsh, and a former Chief Financial Officer at International Gaming Technology Alberto Fornaro last year in important positions.

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