SoftBank doubles down on Korean online retailer Coupang with $2 bln investment (updated)

Shinsegae

20/11/2018 14:28

(Adds comment on possible IPO)
    By Josh Smith and Heekyong Yang
    SEOUL, Nov 20 (Reuters) - SoftBank Group Corp's  9984.T 
Vision Fund is investing $2 billion in South Korea's top
e-commerce firm Coupang, the retailer said on Tuesday, as the
loss-making startup girds for battle against rivals backed by
the country's cash-rich chaebol.
    The latest investment follows the $1 billion that SoftBank
invested in Coupang in 2015 and values the eight-year-old
startup at around $9 billion, a source close to Coupang said.
    Coupang has since grown rapidly to become a major player in
the country's e-commerce market. It clocked 2.7 trillion won
($2.4 billion) in revenue last year, with its online sales
almost as much as the next three largest e-commerce sites in the
country combined, according to research firm Statista.
    But it has also suffered large losses, totalling 1.9
trillion won over the past five years, as it poured money into
building new technology and its logistics infrastructure.
    "The $2 billion we are receiving now is exciting, because we
can invest in more technology platforms that enable this
innovation," Coupang founder and chief executive Bom Kim told
Reuters.    
    In the race to differentiate itself in a market that
delivery companies and big conglomerates are thronging, Coupang
has moved beyond being just a website and a collection of
warehouses by pouring resources into building up a huge delivery
network.
    It also made a splash with its 'Rocket Delivery' service
that promises delivery within 24 hours, as well as the more
recent "Dawn Delivery" service.
    "The reason we were able to do that in such a short period
of time is because of that technology investment we made over
the years," Kim said.
    Coupang says its revenue has doubled in the past year and is
now approaching $5 billion in 2018.
    But the losses incurred in building out that large
infrastructure and workforce have raised questions about whether
Coupang can compete long-term, especially against more
established players like E-Mart and Lotte.
    Reflecting the ballooning losses, the $1 billion previous
investment by SoftBank was marked down by 30 percent to $700
million when it transferred the Coupang stake to the Vision Fund
this year.
    For SoftBank and its $98 billion Vision Fund, Coupang marks
another significant investment in a loss-making startup, as they
seek to put a huge pool of capital to work and earn an
attractive enough return.
    SoftBank is also injecting an additional $3 billion in
loss-making U.S. shared office space provider WeWork Cos,
Reuters reported earlier this month.  urn:newsml:reuters.com:*:nL4N1XO5IV
    "We believe the company is well-positioned to lead the
Korean e-commerce market, with significant platform
opportunities ahead given its data, payments and logistics
advantage," Lydia Jett, partner at SoftBank Investment Advisers
and a Coupang board member, said in a statement.
    While Coupang had been considering 2019 for an initial
public offering, this new round of financing makes that a more
long-term goal, Jett told Reuters in an interview.
    "It’s still on the road map, but I think there is still a
lot of room to continue to expand the value proposition for the
customers before we do that," she said.
    With strong technological and mobile adoption, South Korea
is one of the biggest and fastest-growing e-commerce markets
worldwide.
    Its retail e-commerce volume will grow to $32.6 billion by
2021 from $19 billion in 2016, Statista research said.
    In January, E-Mart and its parent company Shinsegae
 004170.KS  announced a plan to use a $940 million investment
from private equity firms to expand their online offerings.
($1 = 1,127.0200 won)

 (Additional reporting by Ju-min Park; Editing by Muralikumar
Anantharaman and Louise Heavens)
 ((ju-min.park@thomsonreuters.com; +82 2 3704 5650; Reuters
Messaging: ju-min.park.thomsonreuters.com@reuters.net))