S-1/A 1 coupang-sx1a1.htm S-1/A Document

As filed with the Securities and Exchange Commission on March 1, 2021.
Registration No. 333-253030                    
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COUPANG, INC.*
(Exact name of Registrant as specified in its charter)
Delaware596127-2810505
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
Tower 730, 570, Songpa-daero, Songpa-gu, Seoul
Republic of Korea
05510
+82 (2) 6150-5422

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Bom Suk Kim
Chief Executive Officer
Emily Epstein
Corporate Secretary
Coupang, Inc.
Tower 730, 570, Songpa-daero, Songpa-gu, Seoul
Republic of Korea
05510
+82 (2) 6150-5422
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Eric C. Jensen
Calise Y. Cheng
Natalie Y. Karam
Cooley LLP
3175 Hanover Street
Palo Alto, California 94304
(650) 843-5000
Will H. Cai
Ferish Patel
Cooley LLP
Suites 3501 – 3505, 35/F
Two Exchange Square
8 Connaught Place
Central, Hong Kong  
+852 3758-1200
Gary J. Simon
Ken Lefkowitz
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
(212) 837-6000
Tad J. Freese
Richard A. Kline
Sarah Axtell
Brian D. Paulson
Latham & Watkins LLP
140 Scott Drive
Menlo Park, California 94025
(650) 328-4600
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities To Be Registered
Amount to be Registered
Proposed Maximum Offering Price Per Share(1)
Proposed Maximum Aggregate Offering Price
Amount of
Registration Fee(2)
Class A Common Stock, $0.0001 par value per share120,000,000$30.00$3,600,000,000$392,760
(1)Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(a) of the Securities Act of 1933, as amended.
(2)The registrant previously paid a registration fee of $109,100 in connection with prior filings of this registration statement.
*Immediately prior to the effectiveness of this Registration Statement, Coupang, LLC will convert into a Delaware corporation pursuant to a statutory conversion and will change its name to Coupang, Inc. See “Corporate Conversion” in the accompanying prospectus.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.



The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated March 1, 2021.
120,000,000 Shares
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Coupang, Inc.
Class A Common Stock
This is an initial public offering of shares of Class A common stock of Coupang, Inc. We are offering 100,000,000 shares of our Class A common stock. The selling stockholders identified in this prospectus are offering 20,000,000 shares of our Class A common stock. We will not receive any proceeds from the sale of shares by the selling stockholders.
Prior to this offering, there has been no public market for our Class A common stock. It is currently estimated that the initial public offering price will be between $27.00 and $30.00 per share. We have been approved to list our Class A common stock on the New York Stock Exchange under the symbol “CPNG.”
We have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 29 votes per share and is convertible into one share of Class A common stock. Outstanding shares of Class B common stock, all of which will be beneficially held by Bom Suk Kim, our Founder and Chief Executive Officer, will represent approximately 76.7% of the voting power of our outstanding capital stock immediately following this offering.
Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 15 to read about factors you should consider before buying shares of our Class A common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per ShareTotal
Initial public offering price$$
Underwriting discount(1)
$$
Proceeds, before expenses, to us$$
Proceeds, before expenses, to selling stockholders$$
_____________
(1)See the section titled “Underwriting” for a description of the compensation payable to the underwriters.
The underwriters do not have an option to purchase additional shares of our Class A common stock from us at the initial offering price less the underwriting discount.
The underwriters expect to deliver the shares against payment in New York, New York on           , 2021.
Goldman Sachs & Co. LLCAllen & Company LLCJ.P. Morgan
Citigroup
HSBC Deutsche Bank SecuritiesUBS Investment BankMizuho SecuritiesCLSA
Prospectus dated           , 2021.



EXPLANATORY NOTE
Immediately prior to the effectiveness of this registration statement, the registrant, Coupang, LLC, a Delaware limited liability company, will convert into a Delaware corporation pursuant to a statutory conversion and change its name to Coupang, Inc. as described in the section titled “Corporate Conversion” of the accompanying prospectus. In this prospectus, we refer to our conversion to a corporation as the “Corporate Conversion.” As a result of the Corporate Conversion, the unitholders of Coupang, LLC (other than our Founder and Chief Executive Officer, Bom Suk Kim) will become holders of shares of Class A common stock of Coupang, Inc. and Mr. Kim will become the sole holder of shares of our Class B common stock. Except as disclosed in this prospectus, the consolidated financial statements and selected historical financial data and other financial information included in this registration statement are those of Coupang, LLC and do not give effect to the Corporate Conversion. Only shares of Class A common stock of Coupang, Inc. are being sold in this offering.



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TABLE OF CONTENTS
Page
Through and including          , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Neither we, the selling stockholders, nor any of the underwriters have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. Neither we, the selling stockholders, nor any of the underwriters take any responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Class A common stock. Our business, financial condition, results of operations, and future growth prospects may have changed since that date.
For investors outside the United States: neither we, the selling stockholders, nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our Class A common stock and the distribution of this prospectus outside of the United States.



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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, all references in this prospectus to “we,” “us,” “our,” “our company,” “the Company,” and “Coupang” refer, prior to the Corporate Conversion, to Coupang, LLC, and after the Corporate Conversion, to Coupang, Inc. Unless otherwise indicated, references to our “common stock” include both our Class A common stock and Class B common stock. References to the “selling stockholders” refer to the selling stockholders named in this prospectus.
Our Mission
To create a world where customers wonder: “How did I ever live without Coupang?”
Overview
We are building the next generation experience for e-commerce. We believe that by investing for the long term in technology and infrastructure with a fanatical culture of customer centricity, we are delivering a superior customer experience at a lower cost and are continuing to redefine standards for e-commerce worldwide.
Historically, online shopping has forced customers to accept various compromises. E-commerce is convenient, but shipping times can be long and inconsistent. Services promising faster shipping often force us to choose from a fraction of the selection, order before early cut-off times, pay higher fees or prices, or all of the above. And, after delivery, we accept the hassle of cardboard disposal and cumbersome returns as the price of e-commerce convenience.
We set out to address these tradeoffs and transform the customer experience.
Our efforts have centered on building an end-to-end integrated system of technology and infrastructure, which drive our ability to deliver a superior customer experience, launch new offerings, and offer effective merchant solutions.
Our complete integration enables us to control and improve the entire experience, from the customer app to the delivery of the order at the customer’s door, while increasing efficiency and lowering price for customers. It required billions of dollars of investment in technology and infrastructure, exceptional execution, and most importantly, an innovation-focused culture driven to raise our customers’ expectations forever and lead them to wonder “How did I ever live without Coupang?”
We reimagined the e-commerce experience with our Rocket Delivery service:
Dawn and Same-Day Delivery. Millions of items every day—including fresh groceries—are delivered within hours via Dawn Delivery (ordered as late as midnight, arrive before 7am) or Same-Day Delivery (ordered in the morning, arrive same-day).
Next-Day or Faster Delivery for Nearly 100% of Orders. Customers are eligible for free, one-day delivery nationwide 365 days a year—even the day before gift-giving holidays like Christmas
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or Korean Thanksgiving. We have the fastest delivery service compared to other top product e-commerce players in Korea.1
Last Order by Midnight. Customers are promised free, next-day delivery for orders placed any time of day—even seconds before midnight.
Vast Selection of Millions of Items, Including Fresh Groceries. Customers can order from a selection of millions of items across almost every category of goods—from tomatoes to TVs—for next-day delivery. We have the largest number of total SKU count for owned inventory products listed on our e-commerce apps and websites compared to other product e-commerce players in Korea.2 We also have the largest total SKU count for both owned inventory and third party products listed on our e-commerce apps and websites compared to other product e-commerce players in Korea.3
Low Prices Every Day. Our end-to-end integration of technology and infrastructure, retail leadership, and significant scale economies generate cost efficiencies that allow us to pass along savings to our customers in the form of free shipping and low prices. Our strategy is to provide the lowest prices available in the Korean market.
Boxless / Zero Packaging. Our re-engineered fulfillment process eliminated cardboard boxes in over 75% of the parcels we package, and our latest innovation, Zero Packaging, first introduced for Rocket Fresh, eliminates almost all disposable packaging by delivering in eco-bags that are collected for reuse after each delivery.
Frictionless Returns. No need to pack a box or print a label. Our customers simply tap a button on the app and leave the item outside their door for pickup. Refunds are initiated the moment the item is picked up at the door.
To realize such a differentiated customer experience, we built a completely integrated e-commerce and logistics system that controls every facet of the customer experience from the purchase on the app to the delivery and photo confirmation of the order at the door. Here are some highlights:
70% of the population lives within 7 miles of a Coupang logistics center. Our operational infrastructure spans over 25 million square feet across over 30 cities, a footprint of over 400 football fields in a country that is 1% the size of the US geographically. Coupang has the largest B2C logistics footprint as compared to other product e-commerce players in Korea.4
1  Euromonitor International Limited. Fastest delivery service is measured using the difference in time (hours and minutes) from when the customer places an order online to the time the order arrives at the customer’s residence, the result is based on averages from an online delivery tracking study with 1,000 transactions in the Seoul metropolitan area across the top 5 product e-commerce players in the Korean market. “Product e-commerce” is defined the same as the e-commerce definition in Euromonitor Passport Retailing 2021. “Top 5 product e-commerce players” as listed in Euromonitor Passport Retailing 2021, delivery hours, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
2  Euromonitor International Limited. Total SKU count for owned inventory products listed on our e-commerce apps and websites. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, listed product volume, 2021 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
3  Euromonitor International Limited. Total SKU count includes both owned inventory and third party products listed on our e-commerce apps and websites. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, listed product volume, 2021 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
4  Euromonitor International Limited. “Logistics footprint” is defined as the number of logistics centers, including fulfillment centers, logistics centers, and delivery hubs owned by the companies in the report. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, number of logistics centers, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
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Largest directly employed delivery fleet in the country. We operate the largest directly employed delivery fleet in Korea consisting of over 15,000 full-time drivers as of December 31, 2020, who utilize proprietary software and custom-designed trucks that enables delivery to a neighborhood multiple times a day.
Forward-deployment. Our technology leverages machine learning to anticipate demand and forward deploy the inventory closer to customers for fast delivery nationwide.
Dynamic Orchestration. Our technology predicts and assigns the fastest and most efficient path for every order out of hundreds of millions of combinations of inventory, processing, truck, and route options within seconds of the order being placed.
Upstream Optimization for Last-Mile Efficiency. Our integrated, end-to-end systems enable us to build processes upstream that minimize inefficiencies downstream. For example, many packages arrive pre-sorted in truck-ready containers for assigned trucks, making the loading process simpler and faster for drivers.
Much of our innovation in speed, efficiency, waste reduction, and customer convenience has been made possible by the unique end-to-end technology and infrastructure integration that we have pioneered.
We have also extended our network and systems to new offerings that will further improve our customers’ lives. In 2019, we launched our Rocket WOW membership program for a flat monthly fee. It began by offering unlimited free shipping for millions of products with no minimum spend. Today, millions of members also enjoy Dawn Delivery and Same-Day Delivery shipping options, free unlimited returns for 30 days, and Rocket Fresh groceries. Since its launch, Rocket Fresh has grown to become the leading nationwide online grocer. We also launched Coupang Eats, the largest online food delivery service in Korea, which delivers food to customers using only delivery partners directly contracted by us.5 Coupang Eats leverages, in part, the technology and infrastructure that we built for Rocket Delivery. We believe the success of programs like Rocket Fresh and Coupang Eats demonstrates the power of our network to extend new offerings to our loyal customers. As our business model delivers significant operating leverage, we intend to reinvest cash flow generated by our business into new innovations that will delight our customers over the long term, even if a return on these investments is not realized in the short term.
We offer merchants of all sizes effective solutions to improve their customer experience and enhance demand generation. Our customer-to-product matching technology ingests millions of new merchant listings daily into our product knowledge graph, and, leveraging machine learning, provides personalized product exposure to customers based on relevance and predicted customer experience. This technology helps merchants compete holistically on overall customer experience. Our Fulfillment & Logistics by Coupang program empowers merchants to upgrade and become suppliers to offer customers a superior experience through our fulfillment, logistics, delivery, and customer service network. Our myStore service enables merchants, especially small- and medium-sized businesses, to establish a digital store front to build their brand across the internet. Our marketing solutions help merchants increase their sales with effective targeting and broader reach by providing insights and recommendations to manage their business and marketing strategies more effectively.
Our investments in our end-to-end integrated network of technology and infrastructure power our differentiated customer offerings and attractive merchant solutions. Since 2013, we have invested billions of dollars to build our owned-inventory selection, proprietary technology, and the largest B2C logistics
5  Euromonitor International Limited. “Online food delivery service” is defined the same as the Passport Retailing 2021 definition. 100% of sales revenue generated by Coupang Eats is delivered through delivery partners directly contracted by us, while other food delivery providers utilize a mix of delivery partners directly commissioned by restaurants and delivery partners directly contracted by the respective companies, transaction value, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
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footprint as compared to other product e-commerce players in Korea.6 As of December 31, 2020, we had over 100 fulfillment and logistics centers in over 30 cities, encompassing over 25 million square feet. Over 40,000 workers and thousands of delivery vehicles process, fulfill, and deliver millions of items daily. In fact, Coupang is the second largest B2C logistics company in Korea.7 Our proprietary technology promotes visibility and full control across the supply chain, enabling us to shorten delivery times and improve efficiency.
Those investments have been guided by our operating principles of putting customers at the center of everything we do, investing for the long term, learning through rapid iteration, and executing with passion for detail. In our view, our culture of customer centricity is our most important asset, and it drives us to relentlessly pursue operational excellence and innovation.
Today, Coupang is the largest product e-commerce player in Korea.8 However, while we have achieved significant scale, Coupang remains a small percentage of the total retail, grocery, consumer foodservice, and travel spend in the Korean market, which was $470 billion in 2019 and is expected to grow to $534 billion by 2024.9 The e-commerce segment of that total spend was $128 billion in 2019 and is expected to grow to $206 billion by 2024.10 We believe that Coupang is in the early stages of broad customer adoption.
The response of our customers to our offerings has translated into rapid growth, and in turn we are seeing operating leverage in our business. In 2020, our total net revenues were $12.0 billion, up 90.8% from 2019, or 93.1% from 2019 on a constant currency basis.11 Our gross profit12 was $2.0 billion in 2020, up 92.3% from 2019. Our operating loss was $(0.5) billion in 2020, down from $(0.6) billion in 2019, a decrease of $0.1 billion. Operating margin improved to (4.4)% in 2020, an increase of 590 basis points from 2019. Our cash provided by (used in) operating activities improved to $0.3 billion in 2020 from $(0.3) billion in 2019, an improvement of $0.6 billion, and our Free Cash Flow13 improved to $(0.2) billion in 2020 from $(0.5) billion in 2019, an improvement of $0.3 billion.
6  Euromonitor International Limited. “Logistics footprint” is defined as the number of logistics centers, including fulfillment centers, logistics centers, and delivery hubs owned by the companies in the report. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, number of logistics centers, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
7  Euromonitor International Limited. “B2C logistic company” is defined as a service provider that executes the movement and storage of products throughout the supply chain from the point of origin to the point of consumption for B2C businesses, number of domestic packages delivered to consumers, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
8  Euromonitor International Limited, Retailing 2021. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, retail value RSP, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
9  Calculation based on data from Euromonitor International Limited. “Total commerce” defined to include all online and offline retail—including grocery—consumer foodservice, and travel spend. Retailing 2021, Consumer Foodservice 2020, Travel 2021 value RSP, including sales tax, fixed 2019 exchange rate, constant prices. See the section titled “Market, Industry, and Other Data.”
10 Calculation based on data from Euromonitor International Limited. “E-commerce commerce” defined to include online retail— including grocery—consumer foodservice, and travel spend. Retailing 2021, Digital Consumer 2020, Travel 2021, value RSP, including sales tax, fixed 2019 exchange rate, constant prices. See the section titled “Market, Industry, and Other Data.”
11 For additional information about these non-GAAP financial measures, including reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with generally accepted accounting principles in the United States (“GAAP”), see the sections titled “Selected Consolidated Financial and Operating Data—Non-GAAP Financial Measures” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures.”
12  Gross profit is calculated as total net revenues minus cost of sales.
13 For additional information about these non-GAAP financial measures, including reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see the sections titled “Selected Consolidated Financial and Operating Data—Non-GAAP Financial Measures” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures.”
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Our Opportunity
Korea’s Attractive Commerce Market14
Korea is the fourth largest economy in Asia and the twelfth largest globally as of 2019, with a gross domestic product (“GDP”) of $1.6 trillion and GDP per capita of $31,847.15 Total spend in retail, grocery, consumer foodservice, and travel in Korea was $470 billion in 2019 and is expected to increase to $534 billion in 2024.16
Korea is home to one of the largest and fastest growing e-commerce opportunities anywhere in the world.17 Total e-commerce spend was $128 billion in 2019, which is expected to grow to $206 billion by 2024, implying a CAGR of approximately 10%.18 Total e-commerce spend for all Internet buyers in Korea is expected to grow from approximately $2,600 in 2019 to approximately $4,300 in 2024 on a per buyer basis.19
In addition to the size of the opportunity, there are key attributes which have contributed to Korea’s high online growth and make it poised for a technology-led retail innovation. These attributes include:
High Mobile Penetration.
Retail Competitive Landscape.
Lifestyle.
While there are attractive tailwinds for commerce in Korea, it is also one of the most competitive and fastest moving retail markets in the world. To be successful, existing and new entrants must appreciate Korea’s demanding consumer preferences. For online offerings, this extends to building and tailoring an e-commerce solution that surpasses the level of innovation in other mature retail markets, such as the United States.
Coupang’s Value Proposition
To create ever-improving experiences at lower prices for customers, we focus on innovations around our end-to-end integrated network of technology and infrastructure, new offerings, and effective merchant solutions. These investments help us deliver superior selection, convenience, and low prices to customers while helping merchants to improve and grow their businesses.
How We “Wow” Customers. We are committed to delivering a “wow” experience to all of our customers every day. This commitment drives every aspect of our operations and pushes us to redefine the standards of e-commerce.
How We Serve Merchants. We believe that our merchants and the selection that they bring significantly enhance our customer offerings. We have expanded our merchant base over time and fostered long-term merchant loyalty as we extended our value proposition through merchant solutions.
14 We calculate the commerce market by adding the markets for both online and offline retail, grocery, travel, and consumer foodservice.
15 The World Bank. GDP: Euromonitor International, Passport Economies, December 2020, as per national statistics/Eurostat/OECD/UNdata/International Monetary Fund (IMF). Total Population: Euromonitor International, Passport Population, December 2020, as per national statistics/UNdata/Eurostat. See the section titled “Market, Industry, and Other Data.”
16 Calculation based on data from Euromonitor International Limited. “Total commerce” defined to include all online and offline retail—including grocery—consumer foodservice, and travel spend. Retailing 2021, Consumer Foodservice 2020, Travel 2021 value RSP, including sales tax, fixed 2019 exchange rate, constant prices. See the section titled “Market, Industry, and Other Data.”
17 We calculate the e-commerce opportunity by adding the markets for online retail, grocery, travel, and consumer foodservice.
18 Calculation based on data from Euromonitor International Limited. “E-commerce commerce” defined to include online retail— including grocery—consumer foodservice, and travel spend. Retailing 2021, Digital Consumer 2020, Travel 2021, value RSP, including sales tax, fixed 2019 exchange rate, constant prices. See the section titled “Market, Industry, and Other Data.”
19 Calculated based on data from IDC, WW New Media Market Model, Q4 2020 and Euromonitor International Limited. See the section titled “Market, Industry, and Other Data.” Based on the total e-commerce spend divided by the total number of Internet buyers in Korea per IDC of 48 million in 2019 and 2024.
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We will continue to partner with merchants and provide solutions that enable them to grow, scale, and succeed.
Integrated Technology and Infrastructure
We built an end-to-end integrated network of technology and infrastructure capabilities, which has enabled us to address tradeoffs that customers have reluctantly come to accept in e-commerce. Our complete integration enables us to control and improve the entire experience, from the customer app to the delivery of the order at the customer’s door. Our network is integrated from the app all the way to delivery and returns.
Technology. Technology is central to everything we do. We utilize the latest in machine learning, artificial intelligence, cloud-based technologies, and other modern tools to power our differentiated and scalable offerings and services for customers and merchants. Our distribution network and last-mile delivery logistics are orchestrated by technology that enables full supply chain visibility and control. We have also built proprietary technology to propel the front-end experience for our customers.
Infrastructure. We built a seamless infrastructure network to provide our customers with a superior e-commerce experience.
Distribution Network. We built the largest B2C logistics footprint as compared to other product e-commerce players in Korea.20 As of December 31, 2020, we had over 100 fulfillment and logistics centers in over 30 cities, encompassing over 25 million square feet. We utilize optimization technology in our distribution centers to efficiently store and fulfill millions of SKUs across product categories and brands, which enables us to manage a complex supply chain with high inventory turns.
Last-Mile Delivery Infrastructure. We operate the largest directly employed delivery fleet in Korea consisting of over 15,000 drivers as of December 31, 2020, who utilize proprietary software and custom-designed trucks that enable delivery to a neighborhood multiple times a day. We optimize each step from processing and fulfillment all the way to delivery at the door.
Diversified Supply Chain. We have established an extensive network of suppliers and merchants, which enables us to obtain a wide selection of merchandise while maintaining low prices for customers. We offer millions of SKUs under our owned-inventory selection, which requires significant procurement expertise from local and international suppliers. We also source a large proportion of merchandise directly from manufacturers, which can result in better pricing for our customers. Our marketplace attracts a large number of merchants, including small and medium-sized businesses, which enables us to obtain a wide and unique selection of merchandise. As a result, we are able to offer hundreds of millions of SKUs while delivering low prices and a superior experience for our customers.
Sustainability. We have also made our packaging more sustainable through box-free delivery and reusable eco-bags that we pick up and redeploy. These changes were enabled by technology and process innovations across our supply chain. The packaging reduction results in environmental benefits, cost-efficiency improvements, and reduction of an inconvenience for customers commonly associated with e-commerce.
Our Strengths
We believe the following strengths contribute to our success:
20 Euromonitor International Limited. “Logistics footprint” is defined as the number of logistics centers, including fulfillment centers, logistics centers, and delivery hubs owned by the companies in the report. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, number of logistics centers, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
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Culture.
Brand.
Economies of Scale.
Growing Loyal Customer Base.
Scalable, Proprietary, and Integrated Technology.
Nationwide Fulfillment and Last-Mile Delivery Infrastructure.
Business Extensibility.
Our Growth Strategies
The key elements of our growth strategy include:
Attract More Customers.
Increase Customer Engagement.
Continue Investment in Technology and Infrastructure.
Further Expand Our Product Selection.
Explore New Initiatives to Broaden Our Offerings.
Summary Risk Factors
Investing in our Class A common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as further described below. The occurrence of any such risks could adversely affect our business, financial condition, results of operations, and prospects. The principal factors and uncertainties that make investing in our Class A common stock speculative or risky include, among others:
our results of operations may fluctuate significantly, which makes our future results of operations difficult to predict and could cause our results of operations to fall below expectations;
we may be unable to effectively manage the continued growth of our workforce and operations, including the development and management of new business initiatives;
our business is rapidly evolving, and we plan to continue to forgo short-term financial performance for long-term growth, which makes it difficult to evaluate our future prospects and predict our future results of operations, including our revenue growth rate;
we have a history of net losses, including $(475) million, $(699) million and $(1,098) million for fiscal years ended December 31, 2020, 2019, and 2018, respectively, as well as an accumulated deficit of $(4,118) million as of December 31, 2020 and we may not be able to generate sufficient revenue to achieve or maintain profitability in future periods;
if we were to lose the services of members of our senior management team, we may not be able to execute our business strategy;
the COVID-19 pandemic may adversely affect our business, operations, and the markets and communities in which we, our customers, suppliers, merchants, and advertisers operate;
we face intense competition and could lose market share to our competitors if we do not innovate or compete effectively;
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because some of our operations are subject to Korean law, there are circumstances in which certain of our Korean affiliates’ executive officers may be held either directly or vicariously criminally liable for the actions of our Korean affiliates or our Korean affiliates’ executives and employees;
some of our operations are subject to certain detailed and complex fair trade, labor, employment, and workplace safety laws and regulations, which continue to evolve and have and will continue to affect our operations and financial performance, could subject us to costs and penalties, and may affect our reputation; and
the dual class structure of our common stock will have the effect of concentrating voting control with Bom Suk Kim. This voting control will limit your ability to influence the outcome of important transactions and to influence corporate governance matters.
If we are unable to adequately address these and other risks we face, our business may be harmed.
Channels for Disclosure of Information
Following the completion of this offering, we intend to announce material information to the public through filings with the SEC, the investor relations page on our website (www.aboutcoupang.com), press releases, public conference calls, and public webcasts.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
Corporate Conversion
We currently operate as a Delaware limited liability company under the name Coupang, LLC. Immediately prior to the effectiveness of this registration statement, Coupang, LLC will convert into a Delaware corporation pursuant to a statutory conversion and will change its name to Coupang, Inc. In this prospectus, we refer to all transactions related to our conversion to a corporation as the Corporate Conversion. As a result of the Corporate Conversion, all members (other than our Founder and Chief Executive Officer, Bom Suk Kim) of Coupang, LLC will become holders of shares of Class A common stock and Mr. Kim will become the sole holder of shares of our Class B common stock. The number of shares of our Class A common stock that the members (other than Mr. Kim) will be entitled to and receive in the Corporate Conversion and the number of shares of our Class B Common Stock that Mr. Kim will be entitled to and receive in the Corporate Conversion will be based on their relative rights as set forth in our limited liability company agreement. The purpose of the Corporate Conversion is to reorganize our structure so that the entity that is offering our Class A common stock to the public in this offering is a corporation rather than a limited liability company and so that our existing investors will own our Class A common stock rather than equity interests in a limited liability company. For further information regarding the Corporate Conversion, see “Corporate Conversion.”
Corporate Information
We were initially formed in 2010 as Coupang, LLC, a Delaware limited liability company. In connection with this initial public offering, Coupang, LLC will be converted into a Delaware corporation pursuant to a statutory conversion and will change its name to Coupang, Inc. See “Corporate Conversion.” Our principal executive offices are located at Tower 730, 570, Songpa-daero, Songpa-gu, Seoul, Republic of Korea, 05510. Our telephone number is +82 (2) 6150-5422. Our website address is http://www.aboutcoupang.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.
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Our design logos, “Coupang” and our other registered or common law trademarks, service marks, or trade names appearing in this prospectus are our property or our affiliates’ property. Other trade names, trademarks, and service marks used in this prospectus are the property of their respective owners.
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The Offering
Class A common stock offered by us100,000,000 shares
Class A common stock offered by the selling stockholders20,000,000 shares
Class A common stock to be outstanding after this offering1,531,911,152 shares
Total Class A common stock and Class B common stock to be outstanding after this offering1,706,714,142 shares
Voting rights
We will have two classes of common stock: Class A common stock and Class B common stock. Class A common stock is entitled to one vote per share and Class B common stock is entitled to 29 votes per share.

Holders of Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by applicable law or our certificate of incorporation that will be effective upon completion of the Corporate Conversion. The beneficial holder of our outstanding Class B common stock, Bom Suk Kim, our Founder and Chief Executive Officer, will hold approximately 76.7% of the voting power of our outstanding shares following this offering and will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change in control transaction. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of our Class B common stock will convert automatically into one share of our Class A common stock upon any transfer, whether or not for value, except certain transfers to entities, to the extent the transferor retains sole dispositive power and exclusive voting control with respect to the shares of Class B common stock, and certain other transfers described in our certificate of incorporation. See the sections titled “Principal and Selling Stockholders” and “Description of Capital Stock” for additional information.
Concentration of ownership
Once this offering is completed, the holder of our outstanding Class B common stock will beneficially own approximately 10.2% of our outstanding shares and control approximately 76.7% of the voting power of our outstanding shares and our executive officers, directors, and stockholders holding more than 5% of our outstanding shares, together with their affiliates, will beneficially own, in the aggregate, approximately 73.4% of our outstanding shares and control approximately 93.1% of the voting power of our outstanding shares.
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Use of proceeds
We estimate that our net proceeds from the sale of our Class A common stock that we are offering will be approximately $2.8 billion, assuming an initial public offering price of $28.50 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us.
We currently intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. We may also use a portion of the net proceeds for acquisitions of, or strategic investments in, complementary businesses, products, services, or technologies, although we do not currently have any plans or commitments for any material acquisitions or investments. We will not receive any of the proceeds from the sale of shares of our Class A common stock by the selling stockholders in this offering. See the section titled “Use of Proceeds” for additional information.
Risk factorsSee the section titled “Risk Factors” and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our Class A common stock.
Lock-up agreementsWe have entered into lock-up agreements with our executive officers, directors, and certain holders of our Class A common stock that restrict them from transferring shares of our Class A common stock for up to 180 days subject to a number of early release provisions beginning shortly after the pricing of this offering. See the section titled “Shares Eligible for Future Sale—Lock-up Agreements” for a further description.
Proposed New York Stock Exchange trading symbol
“CPNG”
The number of shares of Class A common stock and Class B common stock that will be outstanding after this offering is based on (i) 1,260,155,178 shares of Class A common stock and 174,802,990 shares of Class B common stock, in each case, assuming the Corporate Conversion and, in connection therewith, the automatic conversion of (a) all of our outstanding common units, profits interests, and convertible preferred units (other than those profits interests and convertible preferred units held by Bom Suk Kim) into an equal number of Class A common stock, with respect to such common units and convertible preferred units, and 22,114,201 shares of Class A common stock, with respect to such profits interests, and (b) all of our profits interests and convertible preferred units held by Mr. Kim into an equal number of shares of our Class B common stock, in each case, outstanding as of December 31, 2020, and (ii) the issuance of 171,755,974 shares of our Class A common stock upon the closing of this offering and the automatic conversion of the principal and interest under the convertible notes issued in our 2018 convertible note financing (the “2018 Convertible Notes”) (such number of shares is estimated based on the anticipated number of shares of capital stock to be outstanding on the date of issuance), and excludes:
65,703,982 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock issued under our Third Amended and Restated 2011 Equity Incentive Plan ("2011 Plan"), after giving effect to the Corporate Conversion, with a weighted-average exercise price of $1.95 per share;
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20,765,071 shares of our Class A common stock issuable upon the earlier of (i) six months following the completion of this offering, (ii) the release of the shares from sale restrictions as set forth in the section titled “Shares Eligible For Future Sale—Lock-Up Agreements,” or (iii) March 15 of the calendar year following the completion of this offering for which the restricted equity units (“REUs”) service-based vesting condition was satisfied and the qualifying performance-based liquidity event vesting condition will be satisfied upon completion of this offering, after giving effect to the Corporate Conversion; and
215,103,732 shares of our Class A common stock reserved for future issuance under our 2021 Equity Incentive Plan ("2021 Plan"), including 137,103,680 new shares plus the number of shares (not to exceed 78,000,052 shares) (i) that remain available for grant of future awards under our 2011 Plan, which shares will be added to the shares reserved under our 2021 Plan and will cease to be available for issuance under our 2011 Plan at the time our 2021 Plan becomes effective and (ii) any shares underlying outstanding stock awards granted under our 2011 Plan that expire, or are forfeited, cancelled, withheld, or reacquired, as well as any annual automatic increases in the number of shares of Class A common stock reserved for future issuance under our 2021 Plan.
Upon the execution and delivery of the underwriting agreement related to this offering, any remaining shares available for issuance under our 2011 Plan will become reserved for future issuance as shares of Class A common stock under our 2021 Plan, and we will cease granting awards under our 2011 Plan.
Our 2021 Plan provides for annual automatic increases in the number of shares of Class A common stock reserved thereunder.
Unless otherwise indicated, the information in this prospectus assumes:
the completion of the Corporate Conversion;
in connection with the Corporate Conversion, the automatic conversion of (a) all of our common units, profits interests, and convertible preferred units (other than those profits interests and convertible preferred units held by Bom Suk Kim) into (i) an equal number of shares of Class A common stock, with respect to such common units and convertible preferred units, and 22,114,201 shares of Class A common stock, with respect to such profits interests, and (b) all of our profits interests and convertible preferred units held by Mr. Kim into an equal number of shares of Class B common stock, in each case, outstanding as of December 31, 2020;
the automatic conversion of our Convertible Notes into an aggregate 171,755,974 shares of Class A common stock in connection with this offering;
the filing and effectiveness of our certificate of incorporation and the effectiveness of our bylaws, in each case, in connection with the Corporate Conversion; and
no exercise of outstanding options and no settlement of outstanding REUs.
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Summary Consolidated Financial Data
The summary consolidated statements of operations and of cash flows data for the years ended December 31, 2020, 2019, and 2018 and the summary consolidated balance sheet data as of December 31, 2020 (except for pro forma data) have been derived from our audited consolidated financial statements included elsewhere in this prospectus.
You should read the summary consolidated financial data set forth below in conjunction with our consolidated financial statements and the accompanying notes and the information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Selected Consolidated Financial and Operating Data” contained elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.
Year Ended December 31,
202020192018
(in thousands, except per unit amounts)
Consolidated Statements of Operations Data:
Net retail sales$11,045,096 $5,787,090 $3,799,129 
Net other revenue922,243 486,173 254,460 
Total net revenues11,967,339 6,273,263 4,053,589 
Cost of sales9,981,159 5,240,159 3,864,205 
Operating, general and administrative2,513,912 1,676,941 1,241,790 
Total operating cost and expenses12,495,071 6,917,100 5,105,995 
Operating loss(527,732)(643,837)(1,052,406)
Interest income10,991 19,135 3,925 
Interest expense(107,762)(96,907)(70,949)
Other income, net149,900 22,569 24,177 
Loss before income taxes$(474,603)$(699,040)$(1,095,253)
Income tax expense (benefit)292 (241)2,279 
Net loss$(474,895)$(698,799)$(1,097,532)
Net loss attributable to common unitholders$(567,629)$(770,214)$(1,097,532)
Net loss attributable to common unitholders per unit, basic and diluted$(7.23)$(11.14)$(16.60)
Weighted average number of common units outstanding used in computing per unit amounts, basic and diluted…78,543 69,125 66,117 
Pro forma net loss attributable to common stockholders per share, basic and diluted(1)
$(0.37)
Pro forma weighted average number of shares of common stock outstanding used in computing per share amounts, basic and diluted1,599,739 
Consolidated Statements of Cash Flows Data:
Net cash provided by (used in) operating activities$301,554 $(311,843)$(694,465)
_____________
(1)See Notes 2 and 15 to our audited consolidated financial statements included elsewhere in this prospectus for a description of the method used to calculate basic and diluted pro forma net loss attributable to common stockholders per share.
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As of December 31, 2020
Actual
Pro Forma(1)
Pro Forma As Adjusted(2)
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents$1,251,455 $1,251,455 $4,005,875 
Total assets5,067,332 5,067,332 7,821,752 
Working capital deficit(3)
(891,996)(891,996)1,862,424 
Long-term debt353,342 353,342 353,342 
Convertible notes 589,851 — — 
Total liabilities5,670,583 5,080,732 5,080,732 
Redeemable convertible preferred units3,465,611 — — 
Additional paid-in capital25,036 4,196,411 6,950,821 
Accumulated deficit(4,117,755)(4,178,878)(4,178,878)
Total members’/stockholders' (deficit) equity$(4,068,862)$(13,400)$2,741,020 
_____________
(1)The pro forma consolidated balance sheet gives effect to (i) our Corporate Conversion, and in connection therewith, the automatic conversion of (a) all of our common units, profits interests and convertible preferred units (other than those profits interests and convertible preferred units held by Bom Suk Kim) into an equal number of shares of Class A common stock, with respect to such common units and convertible preferred units, and 22,114,201 shares of Class A common stock, with respect such profits interests, and (b) all of our profits interests and convertible preferred units held by Mr. Kim into an equal number of shares of Class B common stock, in each case, outstanding as of December 31, 2020, (ii) equity-based compensation expense of $41.0 million associated with profits interests (for which the accelerated vesting condition will be satisfied upon completion of this offering) and REUs (for which the service-based vesting condition was satisfied and the qualifying performance-based liquidity event vesting condition will be satisfied upon completion of this offering, however, the shares will settle upon the earlier of (a) six months following the completion of this offering, (b) the release of the shares from sale restrictions as set forth in the section titled “Shares Eligible For Future Sale—Lock-Up Agreements,” or (c) March 15 of the calendar year following the completion of this offering), in each case, outstanding as of December 31, 2020, reflected as an increase in additional paid-in capital and accumulated deficit, and (iii) the issuance of 171,755,974 shares of our Class A common stock upon the closing of this offering and the automatic conversion of the principal and interest under the convertible notes issued in our 2018 convertible note financing (the “2018 Convertible Notes”) (such number of shares is estimated based on the anticipated number of shares of capital stock to be outstanding on the date of issuance).
(2)The pro forma as adjusted consolidated balance sheet gives effect to (i) the pro forma adjustments set forth above and (ii) our issuance and sale of 100,000,000 shares of Class A common stock in this offering at an assumed initial public offering price of $28.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and offering expenses payable by us. We will not receive any proceeds from any sale of shares of our Class A common stock in this offering by the selling stockholders. Accordingly, there is no impact upon the pro forma as adjusted consolidated balance sheet for these shares.
(3)Working capital is defined as current assets less current liabilities.
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RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this prospectus, including our consolidated financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision. The risks described below are not the only ones we face. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, and results of operations. In such case, the price per share of our Class A common stock could decline, and you may lose some or all of your original investment.
Summary Risk Factors
Investing in our Class A common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties, as further described below. The occurrence of any such risks could adversely affect our business, financial condition, results of operations, and prospects. The principal factors and uncertainties that make investing in our Class A common stock speculative or risky include, among others:
our results of operations may fluctuate significantly, which makes our future results of operations difficult to predict and could cause our results of operations to fall below expectations;
we may be unable to effectively manage the continued growth of our workforce and operations, including the development and management of new business initiatives;
our business is rapidly evolving, and we plan to continue to forgo short-term financial performance for long-term growth, which makes it difficult to evaluate our future prospects and predict our future results of operations, including our revenue growth rate;
we have a history of net losses, including $(475) million, $(699) million, and $(1,098) million for fiscal years ended December 31, 2020, 2019, and 2018, respectively, as well as an accumulated deficit of $(4,118) million as of December 31, 2020 and we may not be able to generate sufficient revenue to achieve or maintain profitability in future periods;
if we were to lose the services of members of our senior management team, we may not be able to execute our business strategy;
the COVID-19 pandemic may adversely affect our business, operations, and the markets and communities in which we, our customers, suppliers, merchants, and advertisers operate;
we face intense competition and could lose market share to our competitors if we do not innovate or compete effectively;
because some of our operations are subject to Korean law, there are circumstances in which certain of our Korean affiliates’ executive officers may be held either directly or vicariously criminally liable for the actions of our Korean affiliates or our Korean affiliates’ executives and employees;
some of our operations are subject to certain detailed and complex fair trade, labor, employment, and workplace safety laws and regulations, which continue to evolve and have and will continue to affect our operations and financial performance, could subject us to costs and penalties, and may affect our reputation;
harm to our Coupang brand or our associated brands and marks (our “brand”) or reputation may occur if our suppliers or merchants use unethical or illegal business practices, such as the sale of counterfeit or fraudulent products, or if our protocols with respect to such sales are perceived or found to be inadequate, which may also subject us to possible sanctions or penalties;
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any significant interruptions or delays in service on our apps or websites, or any undetected errors or design faults, could result in limited capacity, reduced demand, processing delays, and loss of customers, suppliers, or merchants;
any failure to protect our apps, websites, networks, and systems against security breaches or otherwise protect our confidential information could damage our reputation and brand and may subject us to possible sanctions or penalties;
any failure to comply with privacy laws or regulations, or to fulfill privacy-related customer expectations in the jurisdictions where we operate, could damage our reputation and brand and business and may subject us to possible sanctions or penalties;
we rely on Coupang Pay to conduct a substantial amount of the payment processing. If Coupang Pay’s services were limited, restricted, curtailed, or degraded in any way, or become unavailable to us or our customers for any reason, our business may be adversely affected;
international relations, including escalations in tensions with North Korea, could adversely affect the Korean or global economies and demand for our products and services; and
the dual class structure of our common stock will have the effect of concentrating voting control with Bom Suk Kim. This voting control will limit your ability to influence the outcome of important transactions and to influence corporate governance matters.
Risks Related to Our Limited Operating History and Growth
We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to generate sufficient revenue to achieve or maintain profitability, which would materially and adversely affect our business, financial condition, and results of operations.
We have a history of net losses, including $(475) million, $(699) million, and $(1,098) million for fiscal years ended December 31, 2020, 2019, and 2018, respectively, as well as an accumulated deficit of $(4,118) million as of December 31, 2020. While we have experienced significant revenue growth since our inception, we are not certain whether or when we will achieve or maintain profitability. We cannot assure you that we will be able to maintain or increase the revenue growth we have experienced during the COVID-19 pandemic. Our costs and expenses have increased, particularly during the COVID-19 pandemic, and such costs and expenses may continue to increase in future periods, which could negatively affect our future results of operations. In particular, we intend to continue to spend significant amounts to increase our customer base, increase the number and variety of merchandise and services we offer, expand our marketing channels, broaden our operations, develop additional fulfillment centers, hire additional employees and managers, and develop our technology and fulfillment infrastructure. These increased costs, including those related to the costs incurred due to COVID-19 safety and health measures and shipping and fulfillment costs, may adversely affect our operating expenses. Some of our initiatives to generate revenue are new and unproven, and any failure of these initiatives could adversely affect our results of operations.
In addition, we expect to invest in longer-term initiatives, which will likely impact our shorter-term results of operations. We may find that these efforts are more expensive than we currently anticipate, or we may encounter technological and other development delays. We will also face increased compliance costs associated with growth, the expansion of our customer base, and being a public company. Our efforts to grow our business may cost more than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses or to achieve or maintain profitability.
We may incur significant losses in the future for a number of reasons, including the other risks described in this “Risk Factors” section, and unforeseen expenses, difficulties, complications or delays, and other unknown events. If we are unable to achieve and sustain profitability, the value of our business and the price per share of our Class A common stock could decline.
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Our limited operating history and evolving business make it difficult to evaluate our future prospects, including our revenue growth rate, as well as the risks and challenges we may encounter.
Our limited operating history and evolving business make it difficult to evaluate and assess our future prospects, as well as the risks and challenges that we may encounter. Although we launched our first website in 2010 and our first mobile application in 2011, our business has rapidly evolved over time. As a result, our ability to accurately forecast our future results of operations is limited and subject to a number of risks and uncertainties, including our ability to plan for and model future growth, and to expand our business in existing markets and enter new markets. In addition, we have experienced significant revenue growth in prior periods. You should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Many factors may contribute to a decline in our growth rate, including market saturation, increased competition, slowing demand (especially once the COVID-19 pandemic tapers), the difficulty of capitalizing on growth opportunities, and the maturation of our business, among others. If our growth rate declines, investors’ perceptions of our business could be adversely affected and the price per share of our Class A common stock could decline.
You should consider our business and prospects in light of the risks and difficulties we may encounter. These risks and difficulties include our ability to, among other things:
attract, on a cost-effective basis, new customers who purchase merchandise and services from us at similar or higher rates and amounts as compared to existing customers;
retain our existing customers and motivate their continued purchases from our apps and websites at rates and amounts consistent with or higher than their historical purchases;
encourage customers to expand the categories of merchandise and services they purchase from us;
retain and expand our network of manufacturers and distributors from whom we buy products (“suppliers”) and the parties that sell their products on our marketplace (“merchants”);
expand our fulfillment and logistics infrastructure and related operations;
fulfill and deliver customer orders on time and in accordance with customer expectations, which may change over time;
increase awareness of our brand;
respond to changes in the way customers access and use the Internet and mobile devices;
react to challenges from existing and new competitors;
expand our business in new and existing markets;
avoid interruptions or disruptions in our business;
further develop our scalable, high-performance technology and fulfillment infrastructure that can efficiently and reliably handle increased usage, as well as the deployment of new features and the sale of new merchandise and services; and
hire, integrate, and retain talented personnel.
If we fail to address the risks and difficulties that we face, including those associated with the challenges listed above and those described elsewhere in this “Risk Factors” section, our business, financial condition, and results of operations would be adversely affected.
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In addition, because we have limited historical financial data and our business continues to evolve and expand, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated a business that is not rapidly evolving and growing. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories and evolving businesses that operate in highly regulated and competitive industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations, and our business, financial condition, and results of operations would be adversely affected.
We may experience significant fluctuations in our results of operations.
Our revenue and results of operations may fluctuate for a variety of reasons, many of which are beyond our control. These reasons include those described elsewhere in this “Risk Factors” section as well as the following:
our ability to attract new and retain existing customers, increase sales to existing customers, and satisfy our customers’ demands;
our ability to offer merchandise and services on favorable terms, manage inventory, and fulfill orders in a timely manner;
the introduction or activities of competitive stores, apps, websites, merchandise, or services;
the success of our growth and expansion efforts, including investments into new initiatives;
variations in our level of merchandise and supplier returns;
the extent to which we offer fast and free delivery through Rocket Delivery, continue to offer a compelling value proposition to our customers, and provide additional benefits to our customers;
factors affecting our reputation or brand image;
the impact of the COVID-19 pandemic or other epidemics on our supply chain, operations and facilities, and employees, as well as consumer perception of our response to COVID-19 or other epidemics;
the extent to which we finance our current operations and future growth, and the terms of any such financing;
the timing, effectiveness, and costs of expansion and upgrades of our systems and infrastructure;
the outcomes of legal proceedings and claims, which may include significant monetary damages, injunctive relief, personal liability (including criminal liability), sanctions, and penalties;
the extent to which we invest in technology and content, fulfillment, and other expense categories;
increases in our temporary or long-term costs such as labor and energy sources, packing supplies, and other goods not for resale;
changes in laws, regulations, or other regulatory practices and enforcement in the countries where we operate;
the extent to which our services are affected by spyware, viruses, phishing, and other spam emails, denial of service attacks, data theft, computer intrusions, outages, and similar events; and
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disruptions from natural or man-made disasters, extreme weather, geopolitical events and security issues (including terrorist attacks and armed hostilities), labor or trade disputes, and similar events.
Fluctuations in our revenues and results of operations may result in their failure to meet the expectations of analysts or investors, which could cause the price per share of our Class A common stock to decline. In addition, our revenue growth may not be sustainable and our growth rates may decrease. Our revenue and results of operations depend in part on the continued growth of demand for the products and services offered by us or our merchants, and on general economic and business conditions worldwide. A softening of demand, whether caused by changes in customer preferences or a weakening of the Korean or global economies, may adversely affect our revenue or growth rate, which could also cause the price per share of our Class A common stock to decline.
We may be unable to accurately forecast our revenue and plan our expenses in the future.
Our results of operations are difficult to forecast because they generally depend on, among other things, the volume, timing, and type of purchases made by our customers, all of which are uncertain and subject to change. Additionally, many of our expenses, including those related to our fulfillment operations, are fixed and, as a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in revenue. Any failure to accurately predict revenue or to adjust our expenses could adversely affect our results of operations in any given quarter, or a series of quarters, which could cause the price per share of our Class A common stock to decline.
Risks Related to Our Business and Our Industry
If we fail to timely identify or effectively respond to changing customer preferences and spending patterns, fail to expand the products being purchased by customers, or fail or are unable to obtain or offer appropriate categories of products, our relationship with our customers could be negatively affected, the demand for our products and services could decrease, and our revenue and results of operations may decline.
Our future revenue depends on continued demand for the types of goods that we and our merchants list on our apps and websites. The popularity of certain products, such as apparel, beauty, food, and consumer electronics may vary over time due to perceived availability, subjective value, and trends of customers and society in general. A decline in the demand for or popularity of certain products sold through our apps or websites without a corresponding increase in demand for different products that we or our merchants list on our apps or websites could reduce our revenue. In addition, short-lived demand for certain products may temporarily inflate the volume of those products listed on our apps and websites, placing a significant strain on our infrastructure and throughput capacity. These trends may also cause significant fluctuations in our results of operations from period to period. A failure to timely identify or effectively respond to changing consumer preferences and spending patterns, an inability to keep adequate inventory of the type of products being purchased by customers, failure to grow and retain the members of our Rocket WOW membership program, or a failure or inability to obtain or offer appropriate categories of products could negatively affect our relationship with customers and the demand for our products and services.
Our ability to locate qualified, economically stable suppliers and merchants who satisfy our requirements, and to acquire sufficient amounts of products in a timely and cost-efficient manner is critical to our business. Any failure to develop sourcing relationships with a broad and deep supplier base could adversely affect our business, financial condition, and results of operations.
Further, we offer our customers private-label products that are available through our apps and websites. The sale of private-label products subjects us to unique risks and heightens certain other risks, including potential product liability risks and mandatory or voluntary product recalls; potential liability with respect to our commercial relationships with subcontractors with whom we engage to manufacture certain
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of our private-label products; potential liability for incidents, including, but not limited to, the injuries of our subcontractors’ employees at manufacturing sites that we do not control; our ability to successfully protect our intellectual property rights and the rights of applicable third parties; and other risks generally encountered by entities that source, market, and sell private-label products.
If we are unable to successfully implement some or all of our major strategic initiatives in a timely manner, our ability to maintain and improve our leading market position in Korea may be adversely affected.
Our strategy is to continue to build on our leading market position in Korea by continuing to implement certain key strategic initiatives, which include the following:
building our brand and further expanding our customer base;
providing high-quality merchandise and services at attractive prices;
focusing on customer satisfaction and our customers’ loyalty to our apps, websites, and programs, including our Rocket WOW membership program;
expanding our product offerings; and
enhancing our apps and websites and developing personalization tools to enhance our customers’ experience with our apps and websites.
We may not be successful in implementing any or all of these key strategic initiatives. If we are unable to successfully implement some or all of our key strategic initiatives in an effective and timely manner, our ability to maintain and improve our leading market position, and our competitive position, brand, and reputation may be harmed, which may have an adverse effect on our business, financial condition, and results of operations.
If we fail to effectively manage our growth, our business, financial condition, and results of operations could be harmed.
We have experienced significant growth since our inception and expect our business to continue to grow if we are successful in implementing our key strategic initiatives. The growth of our business has required and will continue to require the significant attention of our management and expenditure of resources. To effectively manage our growth, we must successfully implement our operational plans and strategies, improve and expand our infrastructure, and expand, train, and manage our employee and contractor base.
For example, we have rapidly increased our employee headcount to support the growth in our business, and we expect to continue to increase our headcount in the foreseeable future. To support our continued growth, we must effectively integrate, develop, and motivate a large number of new employees, while maintaining our corporate culture. In particular, we intend to continue to make substantial investments to expand our sales and technology personnel, which is challenging due to competition for such personnel.
In addition, the growth and expansion of our business and our variety of merchandise and services place significant demands on our management and other employees. For example, in an effort to increase customer engagement, we produce new versions of our apps and websites and communicate to our customers via email, mobile application push communications, and text messages. The continued growth of our business may require significant additional resources to continue these efforts, including increasing the size of our workforce, which may not scale in a cost-effective manner.
Similarly, we must effectively manage any retraction in parts of our business. Periodically, for reasons such as changing consumer preferences and other unforeseen circumstances, decisions may be made to discontinue investment in certain parts of our business. Such decisions require management effort to
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reorganize or reassign employees. In accordance with Korean law, employment contracts generally are not terminable at will unless an employee is deemed to be an “employer” (e.g., a registered director or an executive member-level employee), and employment and labor-related claims are common. If we fail to effectively manage retractions in our business or to successfully reorganize or reassign employees, our ability to meet our goals and our employee morale, productivity, and retention could suffer, which may have an adverse effect on our business, financial condition, and results of operations.
Our revenue depends on prompt and accurate billing processes. Our failure to grow our transaction-processing capabilities to accommodate the increasing number of transactions that must be billed on our apps and websites would materially harm our business and our ability to collect revenue.
Furthermore, we may need to enter into relationships with various strategic partners, websites, and other online service providers and other third parties necessary to support and grow our business. The increased complexity of managing multiple commercial relationships or entering into new relationships could lead to execution problems that could affect current and future revenue and operating margins.
Our current and planned systems, procedures and controls, personnel, and third-party relationships may not be adequate to support our future operations. Our failure to manage growth effectively or to enter into additional third-party relationships on a timely basis could have an adverse effect on our business, financial condition, and results of operations.
If we do not successfully operate and manage the expansion of our fulfillment and delivery infrastructure, our business, financial condition, and results of operations could be harmed.
We believe that our fulfillment and delivery infrastructure, including strategically located fulfillment centers, logistics centers, and delivery vehicles, coupled with our proprietary technology, is essential to our success. We operate our fulfillment and delivery infrastructure throughout Korea and maintain a single fulfillment center in the United States. We are in the process of obtaining and developing additional fulfillment and delivery infrastructure to increase our storage capacity, reduce delivery times, and further improve our workflow and processes.
If we do not expand and operate our fulfillment and delivery infrastructure successfully and efficiently, or there are delays in the expansion of our fulfillment and delivery operations, we could experience excess or insufficient fulfillment and delivery capacity in one or more locations, an increase in costs or impairment charges, or other adverse impacts. For example, we believe that our end-to-end delivery infrastructure, including the ability to control our last-mile delivery logistics, is a key competitive advantage. If our end-to-end delivery infrastructure, including last-mile delivery, is negatively affected in any manner, including, but not limited to, by the introduction of direct competitors with these capabilities or by legislation, legal rulings, or other regulation that may disrupt this service, our business, financial condition, and results of operations would be harmed.
In addition, if we do not have sufficient fulfillment and delivery capacity, or we experience problems fulfilling and delivering orders in a timely manner, our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers.
We have designed, built, purchased, and/or leased our own fulfillment and delivery infrastructure, in addition to utilizing some third-party delivery resources. Our fulfillment and delivery infrastructure was designed to meet the specific needs of our business. If we continue to add fulfillment and delivery capabilities, add new offerings with different fulfillment or delivery requirements, or change the mix of merchandise that we sell, our fulfillment and delivery infrastructure will become increasingly complex, and operating it will become more challenging. Failure to successfully address such challenges in a cost-effective and timely manner could impair our ability to timely deliver our customers’ purchases and could harm our reputation and ultimately, our business, financial condition, and results of operations.
We anticipate the need to add additional fulfillment and delivery capacity as our business continues to grow. We cannot assure you that we will be able to locate suitable facilities on commercially acceptable
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terms in accordance with our expansion plans. If we are unable to secure new facilities for the expansion of our fulfillment operations or effectively control expansion-related expenses, our business, financial condition, and results of operations could be adversely affected.
If we grow faster than we anticipate, we may exceed our fulfillment and delivery capacity, we may experience problems fulfilling or delivering orders in a timely manner, or our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers, and we may need to increase our capital expenditures more than anticipated and in a shorter time frame than we currently anticipate, which could represent a demand on, or drain of, our financial resources and require additional capital. See “—We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.” below.
Our ability to expand our fulfillment and delivery capacity is dependent upon our ability to secure suitable facilities and recruit and retain qualified employees, Coupang Flex partners (independent delivery partners who have signed up to deliver packages on days and times of their own choosing), Eats Delivery Partners or EDPs (independent food delivery partners), and other workers, and there is no assurance that we will be able to secure such facilities or procure such personnel. Our expansion has also been affected by the spread of COVID-19 and related governmental orders. There have been and there may be future delays or increased costs associated with the spread and impact of COVID-19.
Many of the expenses and investments with respect to our fulfillment and delivery capacity are fixed, and any expansion of such fulfillment and delivery infrastructure will require additional investment of capital. We expect to incur higher capital expenditures in the future for our fulfillment and delivery operations as our business continues to grow. We would incur such expenses and make such investments in advance of expected sales, and such expected sales may not occur. Any of these factors could materially and adversely affect our business, financial condition, and results of operations.
We are dependent on the performance of certain members of management and other highly qualified and skilled personnel, and if we are unable to attract, retain, and motivate these and other well-qualified employees, our business could be harmed.
Our success depends largely upon the continued services of our executive officers, other key management team members, and key employees. From time to time, there may be changes in our executive management team or other key employees resulting from the hiring or departure of these personnel. Any of our executive officers or other key employees could terminate their employment with us at any time, and we cannot be assured of having reasonable prior notice. The loss of one or more of our executive officers or other key employees or the failure by our executive team, including any new hires that we may make, to work together effectively and to execute our strategy in a timely manner, could adversely affect our business, financial condition, and results of operations. We do not maintain key man life insurance with respect to any members of management or other employees.
We intend to hire additional qualified employees to support our business operations and planned expansion. Our future success depends, to a significant extent, on our ability to recruit, train, and retain qualified personnel. Since our industry is characterized by high demand and intense worldwide competition for talent and labor, we cannot assure you that we will be able to attract or retain qualified staff or other highly skilled employees that we will need to achieve our strategic objectives. Accordingly, such efforts will require significant time, expense, and attention, and new hires require significant training and time before they achieve full productivity. In addition to hiring new employees, we must continue to focus on developing, motivating, and retaining our best employees, many of whom are at-will employees, which means they may terminate their employment relationship with us at any time. Further, even if qualified new employees are hired and achieve individual effectiveness, we may be adversely affected by undue turnover in our employees.
If we fail to identify, recruit, and integrate strategic personnel hires, our business, financial condition, and results of operations could be adversely affected. Any loss of members of our senior management
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team or key personnel could significantly delay or prevent the achievement of our business objectives and could harm our business and customer relationships. We may need to invest significant amounts of cash and equity to attract and retain new employees, and we may never realize returns on these investments. In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, experiences significant volatility, or increases such that prospective employees believe there is limited upside to the value of our equity awards, it may adversely affect our ability to recruit and retain key employees. If we are not able to retain and motivate our current personnel or effectively add and retain employees, our ability to achieve our strategic objectives, and our business, financial condition, and results of operations will be adversely affected.
Our culture has been critical to our success and if we cannot maintain this culture as we grow, our business could be harmed.
We believe that our culture, where the customer is at the beginning and the end in each decision we make, has been critical to our success. We may face a number of challenges that may affect our ability to sustain our corporate culture, including a potential failure to attract and retain employees who embrace and further our culture, any expansion into additional markets, competitive pressures that may divert us from our vision and values, and the integration of new personnel and businesses from acquisitions. If we are not able to maintain our culture as we continue to grow, our business, financial condition, and results of operations could be adversely affected.
Health epidemics, including the ongoing COVID-19 pandemic, have had, and could in the future have, an adverse impact on our business, operations, and the markets and communities in which we, our customers, suppliers, merchants, and advertisers operate.
Our business and operations could be adversely affected by health epidemics, including the ongoing COVID-19 pandemic, impacting the markets and communities in which we and our customers, suppliers, merchants, and advertisers operate. The COVID-19 pandemic has caused and continues to cause significant disruption to business and financial markets worldwide and has impacted global macroeconomic conditions. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, financial condition, and results of operations will depend on future developments that are highly uncertain and cannot be accurately predicted, and we may be unable to accurately forecast our revenue or financial results. There is no guarantee that a future outbreak of this or any other widespread epidemics or pandemics will not occur, or that global economies will recover, all of which could harm our business.
As a result of the COVID-19 pandemic, we have experienced and may continue to experience disruptions to our operations, including but not limited to utilization of our offices and fulfillment and delivery infrastructure, which may negatively impact our ability to fulfill orders in a timely manner, increase costs, harm our reputation, and ultimately, our business, financial condition, and results of operations.
In response to the COVID-19 pandemic, we have had to modify our operations and adjust our services and technology. For example, our fulfillment and delivery operations now require implementation of social distancing measures as well as system-wide use of personal protective equipment. We have hired additional personnel and incurred additional costs to implement safety controls in response to the COVID-19 pandemic. We have also invested significant resources to design and implement technical and operational changes to date and may continue to do so for an indefinite period of time. Due to the size, scope, and geographically dispersed nature of our operations, the expenses we incur to protect the health and safety of our customers and employees may be higher than similar expenses incurred by companies in other industries. Measures taken across our business operations to address health and safety may not always be sufficient to prevent the spread of COVID-19. Certain employees in our offices, fulfillment centers, and logistics centers have tested positive for COVID-19 despite our best efforts to prevent the spread of COVID-19. We have received governmental inquiries and litigation in Korea with respect to these positive tests and the potential spread of COVID-19 at our locations. Beyond the preventative
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efforts against the transmission of COVID-19, we have incurred significant additional COVID-19-related costs to provide additional compensation to our employees and certain service providers and deliver products to customers. Therefore, if we were to face additional outbreaks or transmission of COVID-19, we would face operational disruptions and incur additional expenses, including assisting customers and employees diagnosed with COVID-19 and further changing health and safety protocols and processes, which could adversely affect our business, financial condition, and results of operations.
While governmental restrictions imposed to limit the spread of COVID-19 and changing consumer behavior in light of the pandemic led to unprecedented demand for our products and services, demand may moderate over time as governmental restrictions are lifted and consumer mobility increases. We cannot assure you that we will be able to retain new suppliers, merchants, advertisers, and customers or maintain the current level of demand for our offerings over the long term, particularly after the effects of the pandemic taper. In addition, the growth in the demand for some products on our apps and websites during the COVID-19 pandemic has resulted in temporary shortages of certain products, which could negatively impact our reputation.
In response to the spread of COVID-19, we are requiring or have required substantially all of our sales, engineering, product, and general and administrative employees to work remotely on some or all work days to comply with applicable laws and to minimize the risk of transmission of COVID-19. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees and customers, including temporary closure of some of our facilities. We cannot guarantee that remote work arrangements will be effective. These arrangements could have a negative impact on our operations, the execution of our business plans, and the productivity and availability of key personnel and other employees necessary to conduct our business. Additionally, our business operations may be disrupted if a significant portion of our workforce is unable to work safely and effectively due to illness, quarantines, government actions, or other restrictions or measures responsive to the pandemic, or if members of senior management are unable to perform their duties for an extended period of time. If a natural disaster, power outage, connectivity issue, or other event were to occur that impacted our applicable employees’ ability to work remotely, it could cause substantial disruption to our business. Decreased effectiveness and availability of our team could adversely affect our financial condition and results of operations due to slow-downs in our sales cycles and recruiting efforts, delays in addressing performance issues, delays in product or technology development, delays and inefficiencies among various operational aspects of our business, including our financial organization, or other decreases in productivity that could seriously harm our business.
In addition to the office closures, the COVID-19 pandemic and related restrictions could result in certain of our suppliers, merchants, and advertisers experiencing downturns or uncertainty in their own business operations or revenue, including closure of their operations temporarily, and in some cases permanently, which in turn may cause reductions or delays in their spending and may result in decreased revenue for us. Further, we may decide to postpone, cancel, or modify planned investments in our business in response to changes in our business as a result of the COVID-19 pandemic, which may impact our ability to attract and retain customers and our rate of innovation, either of which could harm our business. In addition, our facilities needs could evolve based on continuing changes and impact on work environments as a result of the COVID-19 pandemic, and we may not be able to alter our contractual commitments to accommodate such changes, which could cause us to incur additional costs or otherwise harm our business. The COVID-19 pandemic has also resulted in, and may in the future result in, disruptions to the global financial markets, which could negatively affect our access to capital and ultimately, our liquidity. In addition, a recession or market correction resulting from the continued spread of COVID-19 could have a significant impact on our customers’ disposable income, which would adversely affect our business.
The impacts of the COVID-19 pandemic continue to evolve, and we will continue to monitor the situation and the effects on our business and operations closely. We do not yet know the full extent of such impacts, particularly if the COVID-19 pandemic continues to persist and new public health measures are implemented. Given the uncertainty, we cannot reasonably estimate the impact on our future results
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of operations, cash flows, or financial condition. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section. Any of the foregoing factors, or other effects of the pandemic or any other epidemic that are not currently foreseeable, could adversely impact our business, financial condition, and results of operations.
Our expansion into new offerings and substantial increase in the number of our offerings may expose us to new and increased challenges and risks.
In recent years, we have expanded our offerings, including in consumer electronics, food and grocery, financial services, private-label brands, apparel, and travel. Expansion into diverse new products and offerings involves new risks and challenges. Our lack of familiarity with new products and services and lack of relevant customer data relating to these new offerings may make it more difficult for us to anticipate customer demand and preferences. We may misjudge customer demand and the potential profitability of a new product or service. We may find it more difficult to inspect and control quality and ensure proper handling, storage, and delivery of new products. We may experience higher return rates on new products, customer complaints about new products and services, and costly liability claims as a result of selling such products and services, any of which would harm our brand and reputation as well as our results of operations. We may need to price aggressively to gain market share or remain competitive in new categories. It may be difficult for us to achieve profitability in the new product or service categories and our profit margin, if any, may be lower than we anticipate, which would adversely affect our results of operations. We cannot assure you that we will be able to recoup our investments in introducing any new product and service categories.
We operate in a highly competitive industry and we may be unsuccessful in competing against current and future competitors, which could have a negative impact on the success of our business.
The industry in which we operate is intensely competitive and we expect that competition will continue to increase. We currently and potentially compete with a wide variety of online and offline companies providing goods and services to customers and merchants, including traditional retailers and merchandisers, such as department stores, discount warehouses, direct retailers, and home-shopping channels. The Internet and mobile networks provide new, rapidly evolving, and intensely competitive channels for the sale of all types of goods and services. We compete in two-sided markets and must attract both customers as well as merchants to use our apps and websites. Customers who purchase goods and services through us have many alternatives, and merchants have other channels to reach customers. We expect competition to continue to intensify. Online and offline businesses compete with each other, and our competitors include a number of online and offline retailers with greater resources, large user communities, and well-established brands. As we respond to changes in the competitive environment, we may, from time to time, make pricing, service, or marketing decisions or acquisitions that may lead to dissatisfaction among customers and merchants, which could reduce activity on our apps or websites and adversely affect our results of operations.
We face increased competitive pressure online and offline. In particular, the competitive norm for, and the expected level of service from, retailers (including e-commerce retailers) and marketplaces has increased due to, among other factors, improved customer experience, greater ease of buying goods, lower (or no) shipping costs, faster shipping times, and more favorable return policies. In addition, certain online and offline businesses may offer goods and services to consumers and merchants that we do not offer. If we are unable to change our offerings in ways that reflect the changing demands of offline and online retailers and marketplaces, particularly at expected service levels, or compete effectively with and adapt to changes in larger retail businesses, our business, financial condition, and results of operations would be adversely affected.
Competitors may also be able to devote more resources to marketing and promotional campaigns, adopt more aggressive pricing policies, and devote more resources to offline shopping venues, websites,
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mobile applications, and systems development than we can. In addition, competitors may be able to innovate faster and more efficiently, and new technologies may increase the competitive pressures by enabling competitors to offer more efficient or lower-cost services.
Some of our competitors control other products and services that are important to our success, including credit card interchange, Internet search, and mobile operating systems. Such competitors could utilize complementary aspects of their businesses in order to provide a better shopping experience or make it difficult for customers to utilize our apps or websites, or change pricing, availability, or the terms or operation of service related to their products and services in a manner that impacts our competitive offerings. If we are unable to use or adapt to operational changes in such services, we may face higher costs for such services, encounter integration or technological barriers, or lose customers, which could cause our business, financial condition, and results of operations to be adversely affected.
In addition, certain manufacturers may limit or cease distribution of their products through online channels, such as our apps or websites. Manufacturers may attempt to use contractual obligations or existing or future government regulation to prohibit or limit e-commerce in certain categories of goods or services. Manufacturers may also attempt to enforce minimum resale price maintenance or minimum advertised price arrangements to prevent distributors and suppliers from selling on our apps, websites, or on the Internet generally, or drive distributors and suppliers to sell at prices that would make us less competitive. The adoption by manufacturers of policies, or their use of laws or regulations, in each case discouraging or restricting the sales of goods or services over the Internet, could force merchants to limit or stop selling certain products on our apps or websites, which could adversely affect our results of operations and result in loss of market share and diminished value of our brand.
Many of our competitors have, and potential competitors may have, competitive advantages such as longer operating histories, more experience in implementing their business plan and strategy, better brand recognition, popular offline locations, greater negotiating leverage, established supply relationships, significantly greater financial, marketing, and other resources. Our competitors may undertake aggressive marketing campaigns to enhance their brand name and increase the volume of business conducted through their stores or websites and make extensive investments to improve their stores or network and system infrastructure, including website design and logistics network enhancements. Our inability to adequately address these and other competitive pressures may have an adverse effect on our business, financial condition, and results of operations.
Any harm to our brand or reputation may materially and adversely affect our business, financial condition, and results of operations.
We believe that the recognition and reputation of our brand among our customers, merchants, suppliers, and our workforce has contributed to the growth and success of our business. Maintaining and enhancing the recognition and reputation of our brand is critical to our business and competitiveness. Heightened regulatory and public concerns over operation of the business, labor and employment, consumer protection, and consumer safety issues, among other issues, may subject us to additional legal and reputational risks and increased scrutiny. In addition, changes in our services or policies have resulted, and could result, in objections by members of the public, the traditional, new, and social media, social network operators, suppliers, and merchants or others. From time to time, these objections or allegations, regardless of their veracity, may result in customer dissatisfaction, which could result in government inquiries or substantial harm to our brand, reputation, and prospects.
A public perception that non-authentic, counterfeit, or defective goods are sold on our apps and websites or that we or our merchants do not provide satisfactory customer service, even if factually incorrect or based on isolated incidents, could damage our reputation, diminish the value of our brand, undermine the trust and credibility we have established, and have a negative impact on our ability to attract new customers or retain our current customers. If we are unable to maintain our reputation, enhance our brand recognition, or increase positive awareness of our apps, websites, products, and services, as well as products sold by merchants through our online marketplace, it may be difficult to
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maintain and grow our customer base, and our business, financial condition, and results of operations may be adversely affected.
We are subject to risks associated with sourcing and manufacturing goods from countries outside of Korea.
A portion of our sales are dependent on our ability to import finished goods from other countries into Korea. Substantially all of our import operations are subject to customs requirements. The countries from which some of our products are manufactured or exported, or into which our products are imported, may from time to time impose quotas, duties, tariffs, or other restrictions on imports (including restrictions on manufacturing operations) or adversely modify existing restrictions. Changes in Korea, China, U.S., and other foreign government policies regarding international trade, including import and export regulation and international trade agreements, may negatively impact our business. Imports are also subject to unpredictable foreign currency variation which may increase our cost of sales. Adverse changes in these import costs and restrictions, or failure by our suppliers to comply with customs regulations or similar laws, could harm our business.
Our operations are also subject to the effects of international trade agreements and regulations, which may impose requirements that adversely affect our business, such as setting quotas on products that may be imported from a particular country.
Our ability to import products in a timely and cost-effective manner may also be affected by conditions at ports or issues that otherwise affect transportation and warehousing providers, such as port and shipping capacity, labor disputes, severe weather, or increased security requirements in Korea and other countries. These issues could delay importation of products or require us to locate alternative ports or transportation or warehousing providers to avoid disruption to customers. These alternatives may not be available on short notice or could result in higher costs, which could have an adverse impact on our business and financial condition.
If our ability to import goods from overseas is negatively impacted by domestic or international trade regulations (including any future customs requirements, tariffs, and quotas implemented in Korea), our ability to maintain a diverse selection of products for our customers and to be able to timely deliver products consistent with our customers’ expectations could be harmed, which could negatively impact our future revenue and growth.
We operate in a rapidly changing industry and our business model is continuing to evolve, which makes it difficult to evaluate our business and prospects.
The retail industry in which we operate is characterized by rapidly changing regulatory requirements and industry standards and shifting consumer demands. In addition, our business model continues to evolve and we are continuously evaluating our products and services. As a result of our evolving industry and business model, our future results are uncertain and subject to a number of risks and uncertainties, including our ability to plan for and model future growth, expand our business in existing markets, and enter new markets. In addition, we have experienced significant revenue growth in prior periods. You should not rely on the revenue growth of any prior period as an indication of our future performance. Many factors may lead to a decline in our growth rate, including increased competition, slowing demand, a failure by us to continue capitalizing on growth opportunities, higher market penetration, and the maturation of our business, and others, including as discussed elsewhere in this “Risk Factors” section. If we fail to continue to grow, our business could be adversely affected and the price per share of our Class A common stock could decline.
We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies that operate in evolving industries subject to increasing regulation. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could
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differ materially from our expectations and our business, financial condition, and results of operations would be adversely affected.
If we are unable to continue to innovate or if we fail to adapt to changes in our industry, our business, financial condition, and results of operations would be adversely affected.
Our industry is characterized by rapidly changing technology, new mobile applications and protocols, new products and services, new media and entertainment content—including user-generated content—and changing consumer demands and trends. Furthermore, our competitors are continuously developing innovations in personalized search and recommendation, online and offline shopping and marketing, communications, social networking, entertainment, logistics, and other services to enhance the customer experience. Our financial performance depends on our ability to identify, originate, and define retail trends, as well as to anticipate, gauge, and react to changing customer preferences in a timely manner, including seasonal trends in customer spending.
As a result, we continue to invest significant resources in our technology, infrastructure, research and development, and other areas in order to enhance our business and operations, as well as to explore new growth strategies and introduce new high-quality products and services. If we offer new merchandise or services that are not accepted by our customers, we may make fewer sales and our revenue may fall short of expectations, our brand and reputation could be adversely affected, and we may incur expenses that are not offset by revenue. We may make substantial investments in such new categories in anticipation of future revenue. If the launch of a new category requires greater investment than we expect, if we are unable to attract suppliers and merchants that produce sufficient high-quality, value-oriented merchandise and services, or if the revenue generated from sales of a new item of merchandise or service grows more slowly or produces lower gross profit than we expect, our results of operations could be adversely impacted. Expansion of our offerings may also strain our management and operational resources. We may also face greater competition in specific categories from e-commerce and traditional retailers that are more focused on such categories. It may be difficult to differentiate our offering from other competitors as we offer additional categories of merchandise and services, and our customers may have additional considerations in deciding whether or not to purchase these additional offerings. In addition, the relative profitability, if any, of new categories of merchandise or services may be lower than we have experienced historically, and we may not generate sufficient revenue from sales of these new items to recoup our investments in them.
Our investments in innovations and new technologies, which may be significant, may not increase our competitiveness or generate financial returns in the short term, or at all, and we may not be successful in adopting and implementing new technologies. Our investments and endeavors to develop new growth initiatives and technologies may be hindered by regulatory scrutiny and limitations. The changes and developments taking place in our industry may also require us to re-evaluate our business model and adopt significant changes to our long-term strategies and business plans.
Any failure to innovate and adapt to these changes and developments would have an adverse effect on our business, financial condition, and results of operations. Even if we timely innovate and adopt changes in our strategies and plans, we may nevertheless fail to realize the intended benefits of these changes or even experience reduced revenue as a result.
If we fail to retain existing suppliers or merchants or to add new suppliers or merchants, or if our existing suppliers or merchants fail to supply high-quality and compliant merchandise in a timely manner, our business, financial condition, and results of operations will be adversely affected.
We depend on our ability to attract and retain merchants that offer high-quality merchandise and services to our customers at attractive prices and in a timely manner to attract new customers and to keep our existing customers engaged and purchasing from our apps and websites. Similarly, we also must attract and retain suppliers to supply merchandise to us for our owned-inventory selection. We must
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continue to attract and retain suppliers and merchants in order to increase revenue and achieve profitability.
We may experience supplier or merchant attrition in the ordinary course of business, which could lead to a decrease in the volume and/or selection of merchandise available to our customers, resulting in loss of customers to our competitors. Even if we identify new suppliers, we may not be able to purchase desired merchandise in sufficient quantities on terms acceptable to us, and merchandise from alternative sources may be of a lesser quality or more expensive than those from existing suppliers. Similarly, new merchants may not offer the same selection or value to our customers. In addition, we may have disputes with suppliers and merchants with respect to their compliance with our quality control or other policies and measures and the penalties imposed by us for violation of these policies or measures from time to time, which may cause them to cease doing business with us. Any complaints from merchants may in turn result in a negative impact on our brand and reputation. If we experience significant supplier or merchant attrition, or if we are unable to attract new suppliers or merchants, our revenue and results of operations may be materially and adversely affected. Our inability to purchase suitable merchandise on acceptable terms or to source new suppliers and merchants could have an adverse effect on our business, financial condition, and results of operations.
Efforts to increase advertising revenue may impact our sales or results of operations.
Growth in our advertising revenue depends on our ability to continue to develop and offer effective tools for advertisers. New advertising formats that take up more space on our apps and websites may impact customer satisfaction, which could impact our sales. As the advertising market generates and develops new concepts and technology, we may incur additional costs to implement more effective products and tools. Continuing to develop and improve these products and tools may require significant time and resources and additional investment. If we cannot continue to develop and improve our advertising products and tools in a timely fashion, or if our advertising products and tools are not well received by advertisers or customers, our revenue or sales could be adversely affected.
Inventory risks may adversely affect our results of operations.
We are exposed to inventory risks that may adversely affect our results of operations because of seasonality, new product launches, quick changes in product cycles and pricing, defective products, changes in customer demand and spending patterns, changes in customer tastes with respect to our products, spoilage, and other factors. We strive to predict these trends, as overstocking or understocking products we sell could lead to lower sales, missed opportunities, and excessive markdowns, each of which could have a material impact on our business and results of operations. Moreover, once we launch a new product, it may be difficult to determine appropriate product selection and accurately forecast demand, which could increase our inventory risk, resulting in an adverse effect on our business, financial condition, and results of operations.
The seasonality of our business affects our quarterly results and places an increased strain on our operations.
We have historically experienced seasonal fluctuations in our sales, with higher sales volumes associated with Christmas, New Year, Lunar New Year, and Chuseok. Some of these holidays are on the lunar calendar, and thus the associated sales do not always fall in the same quarterly period. We expect to continue to experience seasonal trends in our business, making results of operations variable from quarter to quarter. This variability makes it difficult to predict sales and can result in significant fluctuations in our revenue between periods. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Any failure to stock or restock popular products in sufficient amounts or to develop sufficient fulfillment and delivery capacity to meet customer demand could adversely affect our results of operations. When we overstock products, we may be required to take significant inventory markdowns or write-offs and incur commitment costs, which could result in lower margins and higher labor costs as a percentage of sales, which would harm our financial performance.
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We may also experience increases in our fulfillment and logistics costs due to promotions, split-shipments, changes to our fulfillment and logistics network, and other arrangements necessary to ensure timely delivery during times of high order volume.
If too many customers access our apps or websites within a short period of time due to increased demand, we may experience system interruptions that make our apps or websites unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we offer or sell and have an adverse effect on our results of operations. In addition, we may be unable to adequately staff our fulfillment and delivery network, including our Coupang Flex partners, EDPs, and customer service centers during these peak periods, which may impact our ability to satisfy seasonal or peak demand. Risks related to our fulfillment and delivery infrastructure described above in the risk factor titled “—If we do not successfully operate and manage the expansion of our fulfillment and delivery infrastructure, our business, financial condition, and results of operations could be harmed.” are magnified during the holiday seasons.
We may expand our operations into other countries, which would present new challenges and which may prove unsuccessful and adversely affect our business.
We may expand our operations into other countries, which would present new challenges and which may prove unsuccessful and adversely affect our business. Expansion into additional countries would require significant management attention and resources and would require us to localize our offerings to conform to a wide variety of local cultures, business practices, laws, regulations, and policies. The different commercial and Internet infrastructure in other countries may make it more difficult for us to replicate our business model. We may be competing with local and international companies that understand the local market better than we do, and we may not benefit from first-to-market advantages. If we are not successful in expanding into particular international markets or in generating revenue from such international operations, our business, financial condition, and results of operations may be adversely affected.
Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our business, financial condition, and results of operations.
Our success will depend, in part, on our ability to expand our products and services and grow our business in response to changing technologies, customer demands, and competitive pressures. In some circumstances, we may choose to do so through the acquisition of complementary businesses and technologies rather than through organic growth. The identification of suitable acquisition candidates can be difficult, time-consuming, and costly, and we may not be able to successfully complete identified acquisitions. Further, our anticipated proceeds from this offering increase the likelihood that we will devote resources to exploring larger and more complex acquisitions and investments than we have previously attempted. Once we have completed an acquisition, we may not be able to successfully integrate the acquired business. We face additional risks in connection with acquisitions, including that:
an acquisition may negatively affect our financial condition and results of operations because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by stockholders and third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition;
we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel, or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us;
an acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management;
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an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from us or the acquired company;
we may encounter difficulties in selling or utilizing any acquired products or services, or we may be unable to do so successfully or at all;
our use of cash to pay for acquisitions would limit other potential uses for our cash;
if we incur debt to fund an acquisition, such debt may subject us to material restrictions on our ability to conduct our business, or require us to comply with certain financial maintenance covenants which may adversely affect our ability to conduct our business; and
if we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease or losses per share may increase.
The occurrence of any of these foregoing risks could have an adverse effect on our business, financial condition, and results of operations.
Our business depends on the continued growth of online commerce and the increased acceptance of online transactions by potential customers.
Online commerce is still developing in Korea. Our future revenue depends substantially on Korean customers, suppliers, merchants, and advertisers accepting the Internet as a way to conduct commerce, to purchase goods and services, and to carry out financial transactions. For us to grow our customer base successfully, more customers, merchants, and suppliers must accept and adopt new ways of conducting business and exchanging information, including through mobile devices. Further, service interruptions in Internet access could prevent customers from accessing our apps or websites and placing orders, and frequent interruptions could discourage customers from using our apps or websites, which could cause us to lose customers and harm our results of operations. In addition, we have no control over the costs of the services provided by the telecommunications operators. For more, see “—Our business depends on network and mobile infrastructure, third-party data center hosting facilities, other third-party providers, and our ability to maintain and scale our technology. Any significant interruptions or delays in service on our apps or websites or any undetected errors or design faults could result in limited capacity, reduced demand, processing delays, and loss of customers, suppliers, or merchants.”
Acceptance and use of the Internet are critical to our growth and the occurrence of any one or more of the above challenges could have an adverse effect on our business, financial condition, and results of operations.
If the mobile solutions available to our merchants and customers are not effective, the use of our apps, websites, and marketplaces could decline.
Purchases made on mobile devices by customers have increased significantly in recent years. Our suppliers and merchants are also increasingly using mobile devices to operate their businesses on our apps and websites. If we are unable to deliver a rewarding experience on mobile devices, our ability and the ability of our merchants to manage and scale our respective businesses may be harmed and, consequently, our business may suffer.
As new mobile devices and operating systems are released, we may encounter problems in developing or supporting applications for them. In addition, supporting new devices and mobile device operating systems may require substantial time and resources.
The success of our mobile applications could also be harmed by factors outside our control, such as:
actions taken by providers of mobile operating systems or mobile application download stores;
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unfavorable treatment received by our mobile applications, especially as compared to competing applications, such as the placement of our mobile applications in a mobile application download store;
increased costs to distribute or use our mobile applications; or
changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile websites or mobile applications or that give preferential treatment to competitive products.
If merchants and customers encounter difficulty accessing or using our apps or websites on their mobile devices, or if they choose not to use our apps or websites on their mobile devices, our business, financial condition, and results of operations may be adversely affected.
Failure to deal effectively with fraudulent activities on our apps or websites would increase our fraud losses and harm our business and could severely diminish merchant and customer confidence in and use of our services.
We face risks with respect to fraudulent activities on our apps or websites and periodically receive complaints from customers who assert they have not received the goods they purchased or that goods they received were fraudulent, from merchants who may not have received payment for goods that were purchased, or from manufacturers or others who assert that their intellectual property is being infringed.
Although we have implemented measures to detect and reduce the occurrence of fraudulent activities, combat bad customer experiences, and increase customer satisfaction, including encouraging reporting of concerns, gating and monitoring higher-risk activities, evaluating merchants on the basis of their transaction history, and restricting or suspending some merchants, we cannot assure you that these measures will be effective in combating fraudulent transactions or improving overall satisfaction among merchants and customers. We will need to evolve to combat fraudulent activities as they develop. Any failure to so evolve could result in loss of customer trust. At the same time, the implementation of additional measures to address fraud could negatively affect the attractiveness of our offerings to customers and merchants, or create friction in our customers’ experience.
The nature of our food delivery services, including Coupang Eats and Rocket Fresh, could subject us to potential liability for foodborne illnesses experienced by our customers.
Our Coupang Eats service delivers food prepared by independent restaurants and our Rocket Fresh service delivers fresh food to customers. The business of delivering ready-to-eat and fresh food presents risks related to food freshness, cleanliness, and quality. Whether or not they are true, reports of food-borne illnesses could adversely impact our reputation and results of operations, regardless of whether our customers actually suffer such illnesses. Food-borne illnesses and other food safety issues have occurred in the global food industry in the past and could occur in the future. In addition, customer preferences could be affected by health concerns about the consumption of food provided on Coupang Eats and Rocket Fresh, even if those concerns do not directly relate to food items available on our Coupang Eats and Rocket Fresh websites. A negative report, whether related to a delivery under Coupang Eats or Rocket Fresh or to a competitor, may have an adverse impact on demand for food delivery and could result in decreased orders. A decrease in orders as a result of these health concerns could adversely affect our business, financial condition, and results of operations.
Furthermore, our reliance on third-party food suppliers and distributors increases the risk that food-borne illness incidents could be caused by factors outside of our control. If customers become ill from food-borne illnesses, we and/or merchants on Coupang Eats could be forced to temporarily suspend the Coupang Eats or Rocket Fresh businesses, in whole or in part. Furthermore, any instances of food contamination, whether or not they are related to us, could subject us or restaurants to additional regulations.
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The nature of our delivery logistics, including those related to our own delivery services and our services that use independent delivery partners, exposes us to potential liability and expenses for legal claims that could adversely affect our business, financial condition, and results of operations.
We face risks relating to our delivery services. We use independent delivery partners to deliver prepared food and some packages. For example, tens of thousands of individuals have signed up as Coupang Flex partners. Similarly, our Coupang Eats service delivers food prepared by independent restaurants using the services of independent EDPs. Third parties have in the past and could in the future assert legal claims against us relating to safety incidents associated with delivery drivers. Orders made via Rocket Delivery and Coupang Eats are delivered by drivers of motor vehicles. Some drivers delivering orders via these services have been involved in motor vehicle accidents, and some drivers may be involved in motor vehicle accidents in the future.
We believe that our Coupang Flex partners and EDPs are independent contractors because, among other things, they choose whether, when, and where to provide these services, provide these services at days and times that are convenient for them (or not at all), are free to hold other jobs and provide services to our competitors, provide a vehicle to perform delivery services, decide for themselves how best to perform their services, and are under no long-term or exclusive commitment to us. However, if the classification of our Coupang Flex partners and EDPs as independent contractors were to be challenged by legislation, regulation or legal interpretation, the costs associated with defending, settling, or resolving these matters could be material to our business. Further, any such reclassification would require us to change our business model, including our Coupang Eats service, and consequently have an adverse effect on our business, financial condition, and results of operations.
We have incurred and may continue to incur expenses relating to legal claims on these matters. The frequency of such claims is unpredictable. We could experience diversion of attention by management to address these claims, and such claims can result in significant costs to investigate and defend, regardless of their merits. These claims could adversely affect our business, financial condition, and results of operations.
We rely on Coupang Pay to conduct a substantial amount of the payment processing across our business. If Coupang Pay’s services were limited, restricted, curtailed, or degraded in any way, or become unavailable to us or our customers for any reason, our business may be adversely affected.
Coupang Pay provides our customers with convenient payment processing. These services are critical to our business. We rely on the convenience and ease of use that Coupang Pay provides to our customers and merchants. If the quality, utility, convenience, or attractiveness of Coupang Pay’s services declines for any reason, the attractiveness of our offerings to customers and merchants could be harmed.
Coupang Pay is subject to a number of risks, if they were to materialize, that could materially and adversely affect its ability to provide payment processing services to us, including, but not limited to:
dissatisfaction with Coupang Pay’s services or lower use of Coupang Pay by customers and merchants;
increasing competition, including from other established companies, payment service providers, and companies engaged in other financial technology services;
changes to rules or practices applicable to payment systems that link to Coupang Pay;
breach of customers’ privacy and concerns over the use and security of information collected from customers and any related negative publicity or liability relating thereto;
service outages, system failures, or failure to effectively scale the system to handle large and growing transaction volumes;
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increasing costs to Coupang Pay, including fees charged by banks to process transactions through Coupang Pay, which would also increase our cost of revenue;
negative news about and social media coverage on Coupang Pay, its business, its service offerings, or matters relating to Coupang Pay’s data security and privacy; and
failure to manage customer funds accurately or loss of customer funds, whether due to employee fraud, security breaches, technical errors, or otherwise.
Coupang Pay’s services are highly regulated. Coupang Pay is required to comply with numerous complex and evolving laws, rules, and regulations, particularly in the areas of online and mobile payment services. In addition, as Coupang Pay expands the type and reach of its services within Korea and into international markets, it will become subject to additional legal and regulatory risks and scrutiny.
Increases in food, energy, labor, and other costs could adversely affect our results of operations.
Factors such as inflation, increased food costs, increased labor and employee benefit costs, increased rental costs, and increased energy costs may increase our operating costs and those of our suppliers and independent contractors. Many of the factors affecting suppliers and independent contractors are beyond the control of these parties. In many cases, these increased costs may cause suppliers and independent contractors to spend less time providing services to our customers or to seek alternative sources of income. Likewise, these increased costs may cause suppliers and independent contractors to pass costs on to us and our customers by increasing prices, which would likely cause order volume to decline, and may cause suppliers or independent contractors to cease operations altogether.
We rely on our merchants to provide a fulfilling experience to our customers.
Our marketplace provides many small- and medium-sized businesses with access to customers across Korea. Aggregating their products in one convenient forum provides convenience to customers and an increased business opportunity to merchants. We have policies and procedures to protect both merchants and customers on our marketplace. However, we do not control the merchants, who are independent, third-party businesses. In most cases, the merchants provide fulfillment and arrange for third-party delivery of the orders placed by our customers.
A small portion of customers complain to us about their experience with our merchants. For example, customers may report that they have not received the items that they purchased, that the items received were not as represented by a merchant, or that a merchant has not been responsive to their questions or complaints. We have customer service resources to process such complaints, but we cannot guarantee that these resources have or will resolve all concerns. Similarly, we occasionally identify merchants who are unable to fulfill orders within a timeframe or in a manner consistent with customer expectations.
Negative publicity and sentiment generated as a result of these types of complaints or any associated enforcement action taken against merchants could reduce our ability to attract and retain our merchants and customers or damage our reputation. A perception that our levels of responsiveness and support for our merchants and customers are inadequate could have similar results. In some situations, we may choose to reimburse our customers for their purchases, but we may not be able to recover the funds we expend for those reimbursements. Although we focus on enhancing customer service, our efforts may be unsuccessful and our merchants and customers may be disappointed in their experience and not return.
Anything that prevents the timely processing of orders or delivery of goods to our customers could harm our merchants. Service interruptions and delivery delays may be caused by events that are beyond the control of our merchants, such as transportation disruptions, natural disasters, inclement weather, terrorism, public health crises, or political unrest. Additionally, disruptions in the operations of a substantial number of our merchants could also result in negative experiences for a substantial number of our customers, which could harm our reputation and brand. If our customers have a negative experience
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in the purchase of these products, whether due to quality or timing of delivery, our business, financial condition, and results of operations could be adversely affected.
Failure by our suppliers or merchants to comply with product safety, intellectual property, or other laws may subject us to liability, damage our reputation and brand, and harm our business.
Much of the merchandise we sell on our apps and websites are subject to regulation by Korean laws or administrative agencies. Failure of our suppliers to provide merchandise that complies with all applicable laws, including, without limitation, product safety and intellectual property regulations and statutes, could result in liability, damage to our reputation and brand, increased enforcement activity or litigation, and increased legal costs.
Certain merchandise in the past has been, and could in the future be, subject to recalls and other remedial actions. Such recalls and voluntary removal of merchandise could result in, among other things, lost sales, diverted resources, potential harm to our reputation, and increased customer service costs and legal expenses, which could have an adverse effect on our business, financial condition, and results of operations.
We have in the past become subject to fair trade claims and regulatory actions relating to allegedly false statements on our apps or websites about merchandise and their quality and have been fined by the Korea Fair Trade Commission.
Similarly, failure of our merchants to provide merchandise that complies with all applicable laws could result in liability relating to our marketplace, damage to our reputation and brand, increased enforcement activity or litigation, and increased legal costs.
We have in the past been subject to third-party lawsuits and complaints relating to some of our suppliers’ and merchants’ use of parallel importing, which allows them, other than those with exclusive sale rights in Korea, to also sell merchandise of a particular brand in Korea, so long as the merchandise is purchased from a valid source outside of Korea and the supply chain is documented. We cannot assure you that we will be successful in defending against these claims.
We have also received in the past, and we may receive in the future, communications alleging that certain items provided by suppliers or listed by merchants on our apps and/or websites infringe upon third-party copyrights, trademarks, and trade names or other intellectual property rights of others. Although we have sought to prevent and eliminate the listings of such goods, they may be listed on our apps or websites in the future and we may be held liable to those parties claiming an infringement of their intellectual property rights. Although we have a service quality management team that is responsible for monitoring reports of listing, display, and sales of pirated, counterfeited, prohibited, regulated, or faulty merchandise and services, such items may nevertheless be listed, displayed, or sold on our apps or websites and may subject us to potential lawsuits, sanctions, fines, or other penalties, which could adversely affect our business. For more, see “Risks Related to Intellectual Property—We may be accused of infringing intellectual property rights of third parties.”
Changes to our customer satisfaction program could increase our expenses.
Our customer satisfaction program protects customers from fraudulent transactions, as well as if they do not receive the items ordered or if the items received are significantly different from their descriptions. The risk of loss from our customer satisfaction program is specific to individual customers and transactions, and may also be impacted by modifications to this program resulting from changes in regulatory requirements, or changes that we decide to implement, such as expanding the scope of transactions covered. Increases in our expenses, including as a result of changes to our customer satisfaction program, could negatively impact our business.
We are subject to payment-related risks, and if payment processors are unwilling or unable to provide us with payment processing services or impose onerous requirements on us in order to
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access their services, or if they increase the fees they charge us for these services, our business, financial condition, and results of operations could be adversely affected.
We accept payments using a variety of methods, including credit and debit cards, money transfers, and Coupang Pay. For certain payment methods, including credit and debit cards, we pay bank interchange and other fees. These fees may increase over time, which would increase our operating costs and adversely affect our results of operations. We use third parties to provide payment processing services, including the processing of credit and debit cards. Our business may be disrupted for an extended period of time if any of these companies becomes unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and/or lose our ability to accept credit and debit card payments from customers or facilitate other types of online payments, and our business could be harmed. Moreover, although the payment gateways we use are contractually obligated to indemnify us with respect to liability arising from fraudulent payment transactions, if such fraudulent transactions are related to credit card transactions and become excessive, they could potentially result in our losing the right to accept credit cards for payment. If any of these events were to occur, our business, financial condition, and results of operations could be adversely affected.
Government regulation of the Internet, e-commerce, and mobile commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could adversely affect our business, financial condition, and results of operations.
We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet, e-commerce, and mobile commerce (“m-commerce”). Existing, proposed, and future regulations and laws could change our liabilities and impede the growth of the Internet, e-commerce, or m-commerce. These regulations and laws may involve taxes, tariffs, consumer protection, privacy and data security, anti-spam, content protection, electronic contracts and communications, and gift cards, among other topics. It is not clear how existing laws governing issues such as property ownership, fair trade, sales and other taxes, and consumer privacy apply to the Internet as the vast majority of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet, e-commerce, and m-commerce. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation or our business or result in proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, decrease the use of our apps and websites by customers and merchants, and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations.
Any failure to protect our apps, websites, networks, and systems against security breaches or otherwise protect our confidential information could damage our reputation and brand and adversely affect our business, financial condition, and results of operations.
Our business employs websites, networks, and systems through which we collect, maintain, transmit, and store data about our customers, merchants, suppliers, advertisers, and others, including personally identifiable information, as well as other confidential and proprietary information. We rely on encryption and authentication technology in an effort to securely transmit confidential and sensitive information. We have taken steps to protect the security, integrity, and confidentiality of the information we collect, store, or transmit, but there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts. Our security measures may not detect or prevent all attempts to hack our systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches, or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by our
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apps, websites, networks, and systems, or that we otherwise maintain. We may not be able to anticipate or prevent all types of attacks, and techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers. In addition, security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships. If security breaches occur, our reputation and brand could be damaged, our business may suffer, we could be required to expend significant capital and other resources to alleviate problems caused by such breaches, and we could be exposed to a risk of loss, litigation, or regulatory action and possible liability. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data security, and other laws, and cause significant legal and financial exposure, adverse publicity, and a loss of confidence in our security measures, which could have an adverse effect on our business, financial condition, and results of operations.
We are also subject to regulations relating to privacy and use of confidential information of our users, including, among others, the Personal Information Protection Act and related legislation, regulations and orders (the “PIPA”), the Act on the Promotion of Information and Communications Network Utilization and Protection of Information Act (Korea), and the Credit Information Act in Korea that specifically regulates certain sensitive personal information. PIPA requires consent by the consumer with respect to the use of his or her data and requires the persons responsible for management of personal data to take the necessary technological and managerial measures to prevent data breaches and, among other duties, to notify the Personal Information Protection Commission of any data breach incidents within 24 hours. Failure to comply with PIPA in any manner may subject these persons responsible to personal liability for not obtaining such consent in an appropriate manner or for such breaches, including even negligent breaches, and violators face varying penalties ranging from monetary penalties to imprisonment. We strive to take the necessary technological and managerial measures to comply with PIPA, including the implementation of privacy policies concerning the collection, use, and disclosure of subscriber data on our apps and websites, and we regularly review and update our policies and practices. Despite these efforts to comply with PIPA, these rules are complex and evolving, subject to interpretation by government regulators which may change over time and therefore we are subject to the risk of claims by regulators of failure to comply with PIPA. Any failure, or perceived failure, by us to comply with such policies, laws, regulations, and other legal obligations and regulatory guidance could adversely affect our reputation, brand, and business, and may result in claims, proceedings, or actions, including criminal proceedings, against us and certain of our executive officers by governmental entities or others or other liabilities. Any such claim, proceeding, or action, could hurt our reputation, brand, and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and merchants, and could have an adverse effect on our business, financial condition, and results of operations.
In addition, the California Consumer Privacy Act of 2018 (the “CCPA”), which came into effect in 2020, creates individual privacy rights for certain persons and increases the privacy and security obligations of entities handling certain personal data. For example, the CCPA gives California residents expanded rights to access and require deletion of their personal data, opt out of certain personal data sharing, and receive detailed information about how their personal data are used. Failure to comply with the CCPA creates additional risks including enforcement by the California attorney general, private rights of actions for certain data breaches, and damage to reputation. The CCPA may increase our compliance costs and potential liability with respect to our operations in California. Additionally, a new California ballot initiative, the California Privacy Rights Act, was voted into law in November 2020, which will impose additional data protection obligations on companies doing business in California and would create a new California data protection agency specifically tasked to enforce the law, which would likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security.
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In addition, the European Union adopted the General Data Protection Regulation (the “GDPR”), which became effective in May 2018. The GDPR may impose additional obligations and risk upon our business, and which may increase substantially the penalties to which we could be subject in the event of any non-compliance. We may incur substantial expense in complying with the obligations imposed by the governments of the foreign jurisdictions in which we do business or seek to do business and we may be required to make significant changes in our business operations, all of which may adversely impact our business.
We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business. In addition, legislative and regulatory bodies, or self-regulatory organizations, may expand or change their interpretations of current laws or regulations, or enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection, and consumer protection. Any such changes may force us to incur substantial costs or require us to change our business practices. This could compromise our ability to pursue our growth strategy effectively and may harm our ability to attract new customers or retain existing customers, or otherwise adversely affect our business, financial condition, and results of operations.
Additionally, some providers of consumer devices and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, which could, if widely adopted, result in the use of third-party cookies and other methods of online tracking becoming significantly less effective. The regulation of the use of these cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such practices could adversely affect our business, financial condition, and results of operations.
Our business depends on network and mobile infrastructure, third-party data center hosting facilities, other third-party providers, and our ability to maintain and scale our technology. Any significant interruptions or delays in service on our apps or websites or any undetected errors or design faults could result in limited capacity, reduced demand, processing delays, and loss of customers, suppliers, or merchants.
A key element of our strategy is to generate a high volume of traffic on, and use of, our apps and websites. Our reputation and ability to attract, retain, and serve our customers are dependent upon the reliable performance of our apps and websites and the underlying network infrastructure. As our customer base and the amount of information shared on our apps and websites continue to grow, we will need an increasing amount of network capacity and computing power. We have spent and expect to continue to spend substantial amounts on data centers and equipment and related network infrastructure to handle the traffic on our apps and websites. The operation of these systems is complex and could result in operational failures. In the event that the volume of traffic of our customers exceeds the capacity of our current network infrastructure or in the event that our customer base or the amount of traffic on our apps and websites grows more quickly than anticipated, we may be required to incur significant additional costs to enhance the underlying network infrastructure. Interruptions or delays in these systems, whether due to system failures, computer viruses, physical or electronic break-ins, undetected errors, design faults, or other unexpected events or causes, could affect the security or availability of our apps and websites and prevent our customers from accessing our apps and websites. If sustained or repeated, these performance issues could reduce the attractiveness of our products and services. In addition, the costs and complexities involved in expanding and upgrading our systems may prevent us from doing so in a timely manner and may prevent us from adequately meeting the demand placed on our systems. Any interruption or inadequacy that causes performance issues or interruptions in the availability of our apps or websites could reduce customer satisfaction and result in a reduction in the number of customers purchasing our products and services.
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We depend on the development and maintenance of the Internet and mobile infrastructure. This includes maintenance of reliable Internet and mobile infrastructure with the necessary speed, data capacity, and security, as well as timely development of complementary products, for providing reliable Internet and mobile access. We also use and rely on services from other third parties, such as our telecommunications services and credit card processors, and those services may be subject to outages and interruptions that are not within our control. Failures by our telecommunications providers may interrupt our ability to provide phone support to our customers and distributed denial-of-service attacks directed at our telecommunication service providers could prevent customers from accessing our apps or websites. In addition, we have in the past and may in the future experience down periods where our third-party credit card processors are unable to process the online payments of our customers, disrupting our ability to receive customer orders. Our business, financial condition, and results of operations could be adversely affected if for any reason the reliability of our Internet, telecommunications, payment systems, and mobile infrastructure is compromised.
We offer our products through our apps and websites using the data centers of Amazon Web Services ("AWS"), a provider of cloud infrastructure services. We rely on the Internet to communicate with our customers and merchants and, accordingly, depend on the continuous, reliable, and secure operation of Internet servers, related hardware and software, and network infrastructure. Our operations depend on protecting the virtual cloud infrastructure hosted in AWS and its configuration, architecture, and interconnection specifications, as well as the information stored in these virtual data centers and which third-party Internet service providers transmit. Furthermore, we have no physical access or control over the services provided by AWS and we cannot quickly or easily switch our operations to another third-party cloud infrastructure service provider. A prolonged AWS service disruption affecting our apps or websites could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, or otherwise harm our business. We may also incur significant costs in connection with switching to or using alternative cloud services or taking other actions in preparation for, or in reaction to, events that impact our ability to use AWS services. Damage or interruptions to these data centers could harm our business. Moreover, negative publicity arising from these types of disruptions could damage our reputation and may adversely impact use of our apps and websites.
AWS enables us to access and use its service offerings in varying amounts and sizes, and across multiple regions. AWS provides us with cloud infrastructure services pursuant to an agreement that continues until terminated by either party. AWS may terminate the agreement for any reason by providing us with at least two years’ notice. AWS may also terminate the agreement for cause upon 30 days’ notice, which, in certain instances, is subject to our right to issue an escalation notice, if (i) we are in material breach of the agreement and the material breach remains uncured for a period of 30 days from receipt of notice of such breach, (ii) our use of the service offerings under the agreement (a) poses a security risk to the AWS service offerings or any third party, (b) risks adversely impacting AWS’ systems, the AWS service offerings, or the systems or content of any other AWS customer, or (c) risks subjecting AWS or its affiliates to liability, and in each case, such acts or omissions that are curable are not cured within such 30 day period, (iii) we or our end users are not in compliance with the AWS acceptable use policy or the licensing terms and restrictions set out in the agreement, and such acts or omissions that are curable are not cured within such 30 day period, (iv) we fail to resolve a dispute involving payment of fees, and the disputed amount is not paid within a defined escalation period, except that AWS must first use commercially reasonable efforts to complete a dispute resolution process before terminating the agreement under such provision, and (v) in order to comply with applicable law or binding orders of governmental entities. AWS may also discontinue a service offering that it makes generally available to its customers by providing us with at least 12 months’ prior notice, except that AWS is not obligated to provide such notice if the discontinuation is necessary to address an emergency or threat to the security or integrity of AWS, respond to claims, litigation, or loss of license rights related to third-party intellectual property rights, or to comply with law or the requests of a government entity. AWS agrees that it will not make any such discontinuation in a manner that applies only to us, and not to the other AWS customers generally or to a subset of AWS customers. Termination or suspension of the AWS agreement or the
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underlying service offerings may harm our ability to access data centers we need to host our apps and websites or to do so on similar terms as those we have with AWS.
We also rely on e-mail service providers, bandwidth providers, Internet service providers, and mobile networks to deliver e-mail and “push” communications to customers and to allow customers to access our apps and websites. Any damage to, or failure of, our systems or the systems of our third-party data centers or our other third-party providers could result in interruptions to the availability or functionality of our apps and websites. As a result, we could lose customer data and miss order fulfillment deadlines, which could result in decreased sales, increased overhead costs, excess inventory, and product shortages. If for any reason our arrangements with our data centers or third-party providers are terminated or interrupted, such termination or interruption could adversely affect our business, financial condition, and results of operations. We exercise little control over these providers, which increases our vulnerability to problems with the services they provide. We could experience additional expense in arranging for new facilities, technology, services, and support. In addition, the failure of our third-party data centers or any other third-party providers to meet our capacity requirements could result in interruption in the availability or functionality of our apps and websites.
The satisfactory performance, reliability, and availability of our apps, websites, transaction processing systems, and technology infrastructure are critical to our reputation and our ability to attract and retain customers, as well as to maintain adequate customer service levels. Our revenue depend on the number of customers who shop on our apps and websites and the volume of orders that we can handle. Unavailability of our apps or websites or reduced order fulfillment performance would reduce the volume of goods sold and could also materially and adversely affect customer perception of our brand. Any slowdown or failure of our apps, websites, or the underlying technology infrastructure could harm our business, reputation, and ability to attract, retain, and serve our customers.
The occurrence of a natural disaster, power loss, telecommunications failure, data loss, computer virus, an act of terrorism, cyberattack, vandalism or sabotage, act of war or any similar event, or a decision to close our third-party data centers on which we normally operate or the facilities of any other third-party provider without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in the availability of our apps and websites. If a natural disaster, pandemic, such as the COVID-19 pandemic, blackout, or other unforeseen event were to occur that disrupted the ability to obtain an Internet connection, we may experience a slowdown or delay in our operations.
In addition, certain of our hardware, including data servers, are located at an offsite data center, and certain other equipment is located within our headquarters. Such infrastructure systems are vulnerable to damage or interruption as a result of war, floods, fires, power loss, telecommunications failures, human error, and other similar events. While we have some limited disaster recovery arrangements in place, our preparations may not be adequate to account for disasters or similar events that may occur in the future and may not effectively permit us to continue operating in the event of any problems with respect to our systems or those of our third-party data centers or any other third-party facilities. Our disaster recovery and data redundancy plans may be inadequate, and our business interruption insurance may not be sufficient to compensate us for the losses that could occur. If any such event were to occur, our business, financial condition, and results of operations may be adversely affected.
We are subject to claims, litigation, governmental audits, inspections, investigations, and various legal proceedings, and face potential liability, expenses for legal claims, and harm to our business.
From time to time, we are subject to claims, litigation, governmental audits, inspections, investigations, and other legal proceedings relating to issues such as employment and labor, worker classification and assignment, worker pay, hours and benefits, labor relations including union and collective bargaining issues, employment authorization and immigration, worker safety, intellectual property (including patent, trademark and copyright), product safety, personal injury, privacy, information security, tax compliance, import/export regulations, foreign exchange regulations, licenses and permits, food safety, medical products, drugs and devices, financial services, antitrust and fair trade matters,
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consumer protection, and environmental issues. See the section titled “Business—Legal Proceedings” for additional information about these types of legal proceedings.
We are also subject to investigations by Korean government authorities, including an investigation alleging that we violated the Korean Act on Fair Transactions in Large Retail Business and Monopoly Regulation and Fair Trade Act. The complaint claimed, among other issues, that we engaged in unfair returns of LG Household & Healthcare (“LGHH”) products, illegally requested that LGHH disclose confidential business information, and unfairly refused to do business with LGHH. In addition, current and former employees have raised and may raise allegations with the MOEL or the Occupational Health Safety and Health Agency relating to employment and labor issues. Examples of such issues include pay, hours, breaks, time off, unfair dismissal, health and safety, and union activities.
We intend to vigorously defend each of the legal proceedings described above and believe we have meritorious defenses to each. However, legal proceedings are inherently uncertain, and any judgment, ruling, fine, penalty or injunctive relief entered against us or any adverse settlement in these or other future matters could result in harm to our reputation, sanctions, consent decrees, injunctions, or orders requiring a change in our business practices or otherwise negatively affect our business, results of operations, and financial condition. Any claims against us, whether meritorious or not, could be time-consuming, result in costly litigation, be harmful to our reputation, require significant management attention, and divert significant resources. Further, under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses on behalf of our business and commercial partners and current and former directors and officers.
Our business could be disrupted by catastrophic occurrences and similar events.
Our business and the infrastructure on which our business relies is vulnerable to damage or interruption from catastrophic occurrences, such as earthquakes, floods, fires, power loss, telecommunication failures, terrorist attacks, criminal acts, sabotage, other intentional acts of vandalism and misconduct, geopolitical events, including those related to hostilities between North Korea and Korea, disease, such as the COVID-19 pandemic, and similar events. Our Korean corporate offices and certain of the data centers in which we operate are located in regions known for seismic activity. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our facilities or the facilities of our cloud providers could result in disruptions, outages, and other performance and quality problems. If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster and to execute successfully on those plans in the event of a disaster or emergency, our business would be seriously harmed.
The forecasts of market opportunity and market growth included in this prospectus may prove to be inaccurate, and, even if these forecasts materialize, we cannot assure you our business will grow at similar rates, if at all.
Estimates of market opportunity and forecasts of market growth are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate, including due to the recent impacts from the COVID-19 pandemic. The estimates in this prospectus of the size of the markets that we may be able to address and the forecasts in this prospectus relating to the expected growth in e-commerce and m-commerce are subject to many assumptions and may prove to be inaccurate. These segments of the retail market may not grow at the rates that we forecast. We may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the estimates of market opportunity and forecasts of market growth included in this prospectus should not be taken as indicative of our future growth.
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We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
We have funded our operations since inception primarily through equity and debt financings and revenue generated from our business. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support the development of our various apps and websites and expansion of our commercial offerings, and will require additional funds for such development and expansion. We may need additional funding for marketing expenses and to develop and expand sales resources, develop new features or enhance our marketplace or other offerings, improve our operating infrastructure, or acquire complementary businesses and technologies. Accordingly, we might need or may want to engage in future equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, our ability to develop our apps and websites, support our business growth and respond to business challenges could be significantly impaired, and our business, financial condition, and results of operations may be adversely affected.
The terms of any additional debt we may incur in the future could restrict our ability to effectively conduct our operations. Furthermore, if we raise capital through the issuance of additional equity securities, the new equity securities could have rights senior to those of our Class A common stock. Because our decision to raise additional capital will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future debt or equity financings, or terms on which any such financings may be completed.
Restrictions in our new revolving credit facility could adversely affect our operating flexibility.
In February 2021, we entered into a new senior unsecured revolving credit facility. The new revolving credit facility limits our ability to, among other things:
incur or guarantee additional debt;
make certain investments and acquisitions;
make certain restricted payments and prepayments of certain indebtedness;
incur certain liens or permit them to exist; and
make fundamental changes and dispositions (including dispositions of equity interests of any subsidiary guarantors).
The new revolving credit facility also contains covenants requiring us to maintain certain financial ratios. In addition, the new revolving credit facility is guaranteed on a senior unsecured basis by certain material restricted subsidiaries of Coupang, LLC (including Coupang Corp.), subject to customary exceptions. The provisions of our new revolving credit facility may affect our ability to obtain future financing and to pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. As a result, restrictions in our new revolving credit facility could adversely affect our business, financial condition, and results of operations. In addition, a failure to comply with the provisions of our new revolving credit facility could result in a default or an event of default that could enable our lenders to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable. If the payment of outstanding amounts under our new revolving credit facility is accelerated, our assets may be insufficient to repay such amounts in full, and our common stockholders could experience a partial or total loss of their investment. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Other Liquidity Measures—New Revolving Credit Facility.”
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We have identified certain material weaknesses in our internal control over financial reporting, and if our remediation of such material weaknesses is not effective, or if we experience additional material weaknesses or otherwise fail to design and maintain effective internal control over financial reporting, our ability to timely and accurately report our financial condition and results of operations in compliance with reporting requirements applicable for public companies in the United States could be impaired, which may adversely affect investor confidence in us and, as a result, the value of our Class A common stock.
As a public company, we will be required to maintain internal control over financial reporting and to evaluate and determine the effectiveness of our internal control over financial reporting. Beginning with our annual report on Form 10-K for the year ended December 31, 2022, we will be required to provide a management report on internal control over financial reporting, as well as an attestation of our independent registered public accounting firm to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act.
In 2019, we identified certain material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. In the course of preparing our consolidated financial statements for 2019, we identified material weaknesses in the design and effectiveness of our internal control over financial reporting related to a lack of appropriately designed inventory processes and systems, inadequate review controls over the classification of certain proceeds received from vendors, and inadequate review of the accounting conclusions relating to our convertible notes. These weaknesses resulted in material adjustments to our 2018 consolidated financial statements. During 2020, we completed our remediation efforts related to these material weaknesses and have concluded that these material weaknesses no longer exist as of December 31, 2020. Our completion of the remediation of these material weaknesses does not provide assurance that the remediation or other controls will continue to operate effectively in the future.
Additionally, as part of our readiness efforts for future compliance with Section 404 of the Sarbanes-Oxley Act, we have also commenced the process of performing risk assessments, documenting our processes, performing evaluations, and enhancing our internal control where appropriate. In the course of this process, we also identified certain additional material weaknesses in our internal control over financial reporting relating to (i) the design and effectiveness of information technology general controls, (ii) inadequate segregation of duties, and (iii) inadequate internal control over the timely preparation and review of account reconciliations. We have concluded that these material weaknesses arose because we did not have sufficient qualified accounting resources, formalized processes, and policies necessary to satisfy the accounting and financial reporting requirements of a public company. Following review of these issues and their effect on our consolidated financial statements, we have determined that these material weaknesses did not result in material adjustments to our 2019 consolidated financial statements.
We are actively engaged in the remediation of each of the outstanding material weaknesses, including utilizing the assistance of outside advisors where appropriate, through the performance of the following actions, including: (i) continuing to hire qualified finance and IT employees with appropriate skills and public company experience, (ii) providing additional training for our personnel on internal control over financial reporting, (iii) implementing new and enhancing existing processes and policies, (iv) implementing processes and controls to better identify and manage segregation of duties, and (v) implementing and enhancing information technology processes and internal control.
Our remediation efforts of these outstanding material weaknesses are ongoing. We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the internal control deficiencies that led to our material weaknesses, that the material weaknesses will be remediated on a timely basis, or that additional material weaknesses will not be identified in the future. If the steps we take do not remediate the outstanding material weaknesses in a timely manner, there could continue to be a possibility that these control deficiencies or others could
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result in a material misstatement of our annual or interim consolidated financial statements. Further, our current internal control over financial reporting and any additional internal control over financial reporting that we develop may become inadequate because of changes in conditions in our business. Additionally, weaknesses in our disclosure controls and procedures and internal control over financial reporting may be discovered in the future.
The process of designing and implementing internal control over financial reporting required to comply with the disclosure and attestation requirements of Section 404 of the Sarbanes-Oxley Act will be time consuming and costly. If during the evaluation and testing process we identify additional material weaknesses in our internal control over financial reporting or determine that these existing material weaknesses have not been remediated, our management will be unable to assert that our internal control over financial reporting is effective. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal control over financial reporting. If we are unable to assert that our internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could be adversely affected, and we could become subject to litigation or investigations by the New York Stock Exchange (the “NYSE”), the SEC, Korean authorities, or other regulatory authorities, which could require additional financial and management resources.
As a public reporting company, we will be subject to rules and regulations established from time to time by the SEC and the NYSE regarding our internal control over financial reporting. We may not complete needed improvements to our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in us and, as a result, the price per share of our Class A common stock could decline.
Upon completion of this offering, we will become a public reporting company subject to the rules and regulations established from time to time by the SEC and the NYSE. These rules and regulations will require, among other things, that we establish and periodically evaluate procedures with respect to our internal control over financial reporting. Reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes, and controls, as well as on our personnel. In addition, as a public company we will be required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting for the year ended December 31, 2022. Likewise, our independent registered public accounting firm will be required to provide an attestation report on the effectiveness of our internal control over financial reporting. If our management is unable to certify the effectiveness of our internal control or if our independent registered public accounting firm cannot deliver a report attesting to the effectiveness of our internal control over financial reporting, or if we identify or fail to remediate any significant deficiencies or material weaknesses in our internal control such as those described more fully below, we could be subject to regulatory scrutiny and a loss of public confidence, which could seriously harm our reputation, and the price per share of our Class A common stock could decline. Further, if we do not maintain adequate financial and management personnel, processes, and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, our business could be adversely affected and the price per share of our Class A common stock price could decline.
The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the listing standards of the NYSE, and other applicable
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securities rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources. For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could adversely affect our business, financial condition, and results of operations.
We may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses. In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities.
In addition to changes in the legal landscape, we intend to innovate in our existing business and expand into new business opportunities. These new business opportunities could present new and unfamiliar legal risks. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. We also expect that being a public company that is subject to these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly members who can serve on our audit committee and compensation committee, and qualified executive officers.
As a result of the disclosure obligations required of a public company, our business and financial condition will become more visible, which may result in an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, would divert the resources of our management and could adversely affect our business, financial condition, and results of operations. In addition, as a public company, we may be subject to heightened governmental scrutiny or actions or proceedings brought by governmental regulators, which may exacerbate some or all of the foregoing risks.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and stockholders’ equity/deficit, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, inventories and cost of sales, leases, equity-based compensation expense and valuation of the underlying awards, fair value measurements including common unit valuations and
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embedded derivative instruments. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, and cause the price per share of our Class A common stock to decline.
Failure to comply with anti-corruption and anti-money laundering laws, including the FCPA and similar laws, could subject us to penalties and other adverse consequences.
We operate a global business and may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We are subject to anti-bribery and anti-money laundering laws in countries in which we conduct activities. These laws prohibit companies and their employees and third-party intermediaries from corruptly promising, authorizing, offering, or providing, directly or indirectly, improper payments or anything of value to foreign government officials, political parties, and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person, or securing any advantage. In addition, U.S. public companies are required to maintain records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls. In many foreign countries, including countries in which we may conduct business, it may be a local custom that businesses engage in practices that are prohibited by applicable laws and regulations. We face significant risks if we or any of our directors, officers, employees, agents or other partners or representatives fail to comply with these laws and governmental authorities seek to impose substantial civil and/or criminal fines and penalties which could have a material adverse effect on our business, reputation, results of operations, and financial condition.
We have implemented an anti-corruption compliance program and policies, procedures, and training, however, our employees, consultants, contractors, and agents, and companies to which we outsource certain of our business operations, may take actions in violation of our policies or applicable law. Any such violation could have an adverse effect on our reputation, business, results of operations, and prospects.
Any violation of applicable anti-corruption laws or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, and severe criminal or civil sanctions, any of which could have a materially adverse effect on our reputation, business, financial performance, and results of operations. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.
A failure to comply with current laws, rules and regulations or changes to such laws, rules, and regulations and other legal uncertainties may adversely affect our business, financial performance, results of operations, or business growth.
Our business and financial performance could be adversely affected by unfavorable changes in or interpretations of existing laws, rules, and regulations or the promulgation of new laws, rules, and regulations applicable to us and our business, including those relating to the Internet and e-commerce, Internet advertising and price display, consumer protection, economic and trade sanctions, tax, payments, foreign exchange regulations, banking, data security, network and information systems security, data protection, and privacy. As a result, regulatory authorities could prevent or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us if our practices were found not to comply with applicable regulatory or licensing requirements or any binding interpretation of such requirements. Unfavorable changes or interpretations could decrease demand for our offerings, limit marketing methods and capabilities, affect our margins, increase costs, or subject us to additional liabilities.
Additionally, there are, and will likely continue to be, an increasing number of laws and regulations pertaining to the Internet and e-commerce that may relate to liability for information retrieved from or transmitted over the Internet, display of certain taxes and fees, online editorial and user-generated content, user privacy, data security, network and information systems security, behavioral and online
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advertising, taxation, liability for third-party activities, quality of services, and consumer protection. Further, the growth and development of e-commerce may prompt calls for more stringent consumer protection laws and more aggressive enforcement efforts, which may impose additional burdens on online businesses generally.
Likewise, the U.S. and foreign regulatory authorities continue to enforce economic and trade regulations. Trade sanctions relate to transactions with designated foreign countries and territories, as well as specifically targeted individuals and entities that are identified on blacklists, and those owned by them or those acting on their behalf. Although we have policies and procedures in place designed to promote compliance with these laws and regulations, our employees, partners, or agents could take actions in contravention of our policies and procedures, or violate applicable laws or regulations. In the event our controls should fail, or we are found to be not in compliance for other reasons, we could be subject to monetary damages, civil and criminal monetary penalties, withdrawal of business licenses or permits, litigation, and damage to our reputation and the value of our brand.
Additionally, the law relating to liability of online service providers is currently unsettled. Lawmakers and governmental agencies have in the past and could in the future require changes in the way our business is conducted that might create increased legal liability for online retailers and service providers. Unfavorable regulations, laws, decisions, or interpretations by government or regulatory authorities applying those laws and regulations, or inquiries, investigations, or enforcement actions threatened or initiated by them, could cause us to incur substantial costs, expose us to unanticipated civil and criminal liability or penalties (including substantial monetary fines), increase our cost of doing business, require us to change our business practices in a manner materially adverse to our business, damage our reputation, impede our growth, or otherwise have a material effect on our operations.
Our results of operations and financial condition may be adversely affected by governmental regulation and associated environmental and regulatory costs.
Our business is subject to a wide range of laws and regulations related to environmental and other matters. Such laws and regulations have become increasingly stringent over time. We may experience increased costs due to stricter pollution control requirements or liabilities resulting from noncompliance with operating or other regulatory standards. New regulations, such as those relating to the storage, transportation, and delivery of the products that we sell, might adversely impact operations or make them more costly. In addition, as an owner and operator of commercial real estate, we may be subject to liability under applicable environmental laws for clean-up of any contamination at our facilities. We cannot be sure that we have identified all such contamination, that we know the full extent of our obligations with respect to contamination of which we are aware, or that we will not become responsible for additional contamination not yet discovered. It is possible that material costs and liabilities will be incurred, including those relating to claims for damages to property and persons and the environment. Unfavorable changes in, failure to comply with, or increased costs to comply with environmental laws and regulations could adversely affect our results of operations and financial condition.
Risks Related to Labor and Employment
If we are unable to recruit, train, and retain qualified personnel or sufficient workforce while controlling our labor costs, our business may be materially and adversely affected.
Our future success depends, to a significant extent, on our ability to recruit, train, and retain qualified personnel, particularly technical, fulfillment, marketing, infrastructure, customer service center, and other back office functions and operational personnel. Since our industry is characterized by high demand and intense competition for talent and labor, we can provide no assurance that we will be able to attract or retain qualified staff or other highly skilled employees that we will need to achieve our strategic objectives.
Our fulfillment infrastructure requires a substantial number of workers, and these positions tend to have higher than average turnover. We have observed an overall tightening of the labor market and an
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emerging trend of shortage of labor supply. Failure to hire and retain capable fulfillment, delivery personnel, and other labor support may lead to underperformance of these functions and cause disruption to our business. Labor costs in Korea have increased in connection with heightened scrutiny of workplace conditions in connection with the COVID-19 pandemic. Therefore, to maintain and enhance our competitiveness, we may from time to time need to adjust certain elements of our operations in response to evolving economic conditions, political climate, and business needs. These adjustments, however, may not be sufficient to allow us to address the various challenges we face or improve our results of operations and financial performance as expected.
Any failure to address these fulfillment infrastructure risks and uncertainties could materially and adversely affect our financial conditions and results of operations.
We are subject to fair trade, labor, employment, and workplace health and safety laws and regulations in Korea and other jurisdictions, which continue to evolve and have and will continue to affect some of our operations and our financial performance.
We have a workforce consisting of thousands of employees and independent contractors. We are subject to laws and regulations relating to labor and employment, including requirements on how we recruit, hire, employ, manage, train, discipline, and separate employees and independent contractors in all jurisdictions where we do business, which include both Korea and the United States.
We have been and will continue to be subject to inspections, investigations, disputes, and litigation relating to these labor and employment laws and regulations.
Additional laws and regulations affecting our operations may be adopted in the future, including as a result of the COVID-19 pandemic. The impact of any new laws or regulations or our failure to comply with these laws and regulations may adversely affect our business, financial condition, and results of operations.
Union activities could affect our business.
The Constitution of the Republic of Korea provides workers with rights to collective bargaining and collective action. Currently, some of our workforce are members of a labor union, with which we are currently negotiating a collective bargaining agreement. Unionization of more of our employees or any of our EDPs or Coupang Flex partners may occur and could have an adverse impact on our business, financial condition, or results of operations.
Our business could be adversely affected from an accident, safety incident, or workforce disruption.
Our delivery and fulfillment processes and related activities, as well as our last mile delivery logistics activities are subject to significant regulation. For example, Korean laws and regulations specify very broad and technical safety and health obligations on the employer and service recipient company. Breach of such obligations could result in penalties, such as criminal sanctions, administrative fines, and corrective measure orders (see “Government Regulation—Worker Safety Laws and Regulations”). The MOEL may also order work suspension or use suspension of machinery/equipment if it identifies harmful or dangerous conditions in the workplaces. A breach of the above obligations by the employer or the service recipient company may result in potential civil liability. If we are unable to timely adapt to changing norms and requirements around maintaining a safe workplace during the COVID-19 pandemic could cause employee illness, accidents, or worker discontent.
While we maintain liability insurance in amounts and of the type generally consistent with industry practice, the amount of such coverage may not be adequate to cover fully all claims, and we may be forced to bear substantial losses from an accident or safety incident resulting from our fulfillment or last mile delivery activities. Further, negative publicity related to workforce safety, including our continuing
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response to the COVID-19 pandemic could have an adverse effect on our business, prospects, financial condition, and results of operations.
Risks Related to Doing Business in Korea
There are special risks involved with investing in Korean companies, including the possibility of restrictions being imposed by the Korean government in emergency circumstances, accounting and corporate disclosure standards that differ from those in other jurisdictions, and the risk of direct or vicarious criminal liability for executive officers of our Korean affiliates.
Our wholly-owned subsidiary, Coupang Corp., is a Korean company, and Coupang Corp. and its Korean affiliates operate in a business and cultural environment that is different from that of other countries. For example, under the Foreign Exchange Transaction Act of Korea, if the Korean government determines that in certain emergency circumstances, including sudden fluctuations in interest rates or exchange rates, extreme difficulty in stabilizing the balance of payments or substantial disturbance in the Korean financial and capital markets are likely to occur, it may impose any necessary restriction such as requiring Korean or foreign investors to obtain prior approval from the Minister of Economy and Finance of Korea prior to entering into a capital markets transaction, repatriating interest, dividends or sales proceeds arising from Korean securities or from the disposition of such securities or other transactions involving foreign exchange. Although investors will hold shares of our Class A common stock, Coupang Corp., may experience adverse risks and in turn could adversely impact our business, prospects, financial condition, and results of operations and could lead to a decline in the price per share of our Class A common stock.
In addition, under Korean law, there are circumstances in which certain executive officers of a company may be investigated or held criminally liable either directly or vicariously for the actions of the company and its executives and employees. For example, complaints alleging infringement of intellectual property rights, breaches of certain Korean laws (e.g., labor standards laws and fair trade laws), and product-related claims may be investigated and prosecuted as criminal offenses with both the company and the company’s executive officers being named as defendants in such proceedings. These risks change over time.
As a result of these current and changing risks, our Korean affiliates’ executive officers have in the past been named, and may be named in the future, in criminal investigations or proceedings stemming from our operations. In Korea, company executive officers being named in such investigations or proceedings is a common occurrence, even though in practice many such cases result in no liability to the individual. If our Korean affiliates’ executive officers were to be named in such criminal proceedings or held either directly or vicariously criminally liable for the actions of the company and its executives and employees, our business, financial condition, and results of operations may be harmed.
Coupang Corp.’s transactions with its subsidiaries and affiliates may be restricted under Korean fair trade regulations.
Coupang Corp. enters into business relationships and transactions with its subsidiaries and affiliates, which are subject to scrutiny by the KFTC as to, among other things, whether such relationships and transactions constitute undue financial support among companies in the same business group. If, in the future, the KFTC determines that Coupang Corp. has engaged in transactions that violate the fair trade laws and regulations, it may be subject to an administrative and/or criminal fine, surcharge or other actions, which may have an adverse effect on our business, financial condition, and results of operations.


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Our Korean subsidiary, Coupang Corp., and a group of companies affiliated with it may be designated an affiliated group under Korean law, which would require that group of companies to make certain disclosures and implement additional corporate governance requirements.
Our Korean subsidiary, Coupang Corp., and a group of companies affiliated with it are likely to be designated as a business group subject to disclosure under the Korean Monopoly Regulation and Fair Trade Act. As described in greater detail in the section titled “Government Regulation—The Monopoly Regulation and Fair Trade Act”, such a designation would impose additional corporate governance and public disclosure requirements on this group of affiliated companies. These requirements would create additional costs of compliance and could subject this group of affiliated companies to greater regulatory scrutiny and risk of penalties for any failure to comply with the additional obligations imposed.
Coupang Corp. is subject to certain requirements and restrictions under Korean law that may, in certain circumstances, require it to act in a manner that may not be in our or our stockholders’ best interest.
Under applicable Korean law, directors of a Korean company, such as Coupang Corp., owe a fiduciary duty to the company itself rather than to its stockholders. This fiduciary duty obligates directors of a Korean company to perform their duties faithfully for the good of the company as a whole. As a result, if circumstances arise in which the good of Coupang Corp., conflicts with the good of Coupang, Inc. or our stockholders, Coupang Corp. may not be permitted under applicable Korean law to act in a manner that is in the best interest of Coupang, Inc., as its parent, or our stockholders. For example, providing guarantees or collateral by Coupang Corp. in favor of Coupang, Inc., as its parent, without a justifiable cause and on other than arm’s length terms may cause breach of a fiduciary duty of directors to Coupang Corp.
Approval by the board of directors of a Korean company is required for, among other things, all transactions between a director or major stockholder (including a 10% or more stockholder) and the company for the director’s or the major stockholder’s account. As a result, intercompany transactions between us and Coupang Corp. (or any other Korean subsidiary we may own, from time to time), could arise in the future in which the directors of the Korean subsidiary are not able to act in ours or our stockholders’ best interest as a result of competing interests of the subsidiary. Since substantially all of our operations are conducted by Coupang Corp., any such occurrence with respect to Coupang Corp. could adversely affect our business, financial condition, and results of operations.
Coupang Corp.’s transactions with related parties are subject to close scrutiny by the Korean tax authorities, which may result in adverse tax consequences.
Under Korean tax law, there is an inherent risk that Coupang Corp.’s transactions with its subsidiaries, affiliates or any other person or company that is related to us may be challenged by the Korean tax authorities if such transactions are viewed as having been made on terms that were not on an arm’s-length basis. If the Korean tax authorities determine that any of its transactions with related parties were on other than arm’s-length terms, it may not be permitted to deduct as expenses, or may be required to include as taxable income, any amount which is found to be undue financial support between related parties in such transaction, which may have adverse tax consequences for us and, in turn, may adversely affect our business, financial condition, and results of operations.
A focus on regulating copyright and patent infringement by the Korean government subjects us to extra scrutiny in our operations and could subject us to sanctions, fines, or other penalties, which could adversely affect our business and operations in Korea.
The Korean government has recently focused on addressing copyright and patent infringement in Korea, particularly with respect to luxury and brand name merchandise. Despite measures we have taken to address copyright and patent infringement, the Korean government may subject us to sanctions, fines, or other penalties, which could adversely affect our business and operations in Korea.
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Our business may be adversely affected by developments that negatively impact the Korean economy and uncertainties in economic conditions that impact spending patterns of our customers in Korea.
We have historically generated a substantial majority of our revenue from sales in Korea. Our future performance will depend in large part on Korea’s future economic growth. Adverse developments in Korea’s economy as a result of various factors, including economic, political, legal, regulatory, and social conditions in Korea may have an adverse effect on customer spending, which may not allow us to achieve our desired revenue growth. The economic indicators in Korea in recent years have shown mixed signs of growth and uncertainty, and in 2020, the Korean and global economies were affected as a result of the COVID-19 pandemic. As a result, future growth of the Korean economy is subject to many factors beyond our control, including developments in the global economy.
The Korean economy is closely tied to, and is affected by developments in, the global economy. In recent years, adverse conditions and volatility in the worldwide financial markets, fluctuations in oil and commodity prices, and the COVID-19 pandemic, have contributed to the uncertainty of global economic prospects in general and have adversely affected, and may continue to adversely affect, the Korean economy. Due to liquidity and credit concerns and volatility in the global financial markets, the value of the Korean Won relative to the U.S. dollar and other foreign currencies and the stock prices of Korean companies have fluctuated significantly in recent years. Further declines in the Korea Composite Stock Price Index, and large amounts of sales of Korean securities by foreign investors and subsequent repatriation of the proceeds of such sales may adversely affect the value of the Won, the foreign currency reserves held by financial institutions in Korea, and the ability of Korean companies to raise capital. Any future deterioration of the Korean economy or the global economy could adversely affect our business, financial condition, and results of operations.
Potential developments that could have an adverse impact on Korea’s economy include:
declines in customer confidence and a slowdown in customer spending;
adverse conditions or developments in the economies of countries and regions that are important export markets for Korea, such as China, the United States, Europe, and Japan, or in emerging market economies in Asia or elsewhere, including as a result of deteriorating economic and trade relations between the United States and China and increased uncertainties resulting from the United Kingdom’s exit from the European Union;
adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the Korean Won, the U.S. dollar, the euro or other exchange rates, or the revaluation of the Chinese Renminbi), interest rates, inflation rates, or stock markets;
increased sovereign default risk of select countries and the resulting adverse effects on the global financial markets;
investigations of large Korean business groups and their senior management for possible misconduct;
a continuing rise in the level of household debt and increasing delinquencies and credit defaults by retail and small- and medium-sized enterprise borrowers in Korea;
the continued emergence of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of the manufacturing base from Korea to China), as well as a slowdown in the growth of China’s economy, which is one of Korea’s most important export markets;
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the economic impact of any pending or future free trade agreements or of any changes to existing free trade agreements;
social or labor unrest;
substantial changes in the market prices of Korean real estate;
a decrease in tax revenue and a substantial increase in the Korean government’s expenditures for fiscal stimulus measures, unemployment compensation, and other economic and social programs that, together, would lead to an increased government budget deficit;
financial problems or lack of progress in the restructuring of certain Korean conglomerates, certain other large troubled companies, or their suppliers;
loss of investor confidence arising from corporate accounting irregularities and corporate governance issues concerning certain Korean conglomerates;
increases in social expenditures to support an aging population in Korea or decreases in economic productivity due to the declining population size in Korea;
geopolitical uncertainty and risk of further attacks by terrorist groups around the world;
the occurrence of severe health epidemics in Korea or other parts of the world, such as the COVID-19 pandemic;
deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy (such as the ongoing trade disputes with Japan);
political uncertainty or increasing strife among or within political parties in Korea;
hostilities or political or social tensions involving oil producing countries in the Middle East and North Africa and any material disruption in the global supply of oil or increase in the price of oil;
an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States;
political or social tensions involving Russia and any resulting adverse effects on the global supply of oil or the global financial markets;
natural or man-made disasters that have a significant adverse economic or other impact on Korea or its major trading partners; and
changes in financial regulations in Korea.
Fluctuations in exchange rates could result in foreign currency exchange losses to us.
The value of the Korean Won and other currencies against the U.S. dollar has fluctuated, and may continue to fluctuate and is affected by, among other things, changes in political and economic conditions. It is difficult to predict how market forces or Korean or U.S. government policy, including any interest rate increases by the Federal Reserve, may impact the exchange rate between the Korean Won and the U.S. dollar in the future.
A substantial percentage of our revenue and costs are denominated in Korean Won and the Chinese Renminbi, and a significant portion of our financial assets are also denominated in Korean Won, while a substantial portion of our debt is denominated in U.S. dollars. We are a holding company and we may receive dividends, loans and other distributions on equity paid by our operating subsidiaries in Korea. Any significant fluctuations in the value of the Korean Won may materially and adversely affect our liquidity
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and cash flows. For example, the depreciation of the Korean Won and other foreign currencies against the U.S. dollar typically results in a material increase in the cost of fuel and equipment purchased from outside of Korea and the cost of servicing debt denominated in currencies other than the Korean Won. As a result, any significant depreciation of the Korean Won or other major foreign currencies against the U.S. dollar may have a material adverse effect on our results of operations. If we decide to convert our Korean Won into U.S. dollars for the purpose of repaying principal or interest expense on our outstanding U.S. dollar-denominated debt, making payments for dividends on our Class A common stock, or other business purposes, depreciation of the Korean Won or other foreign currencies against the U.S. dollar would have a negative effect on the U.S. dollar amount we would receive. Conversely, to the extent that we need to convert U.S. dollars into Korean Won for our operations, appreciation of the Korean Won against the U.S. dollar would have an adverse effect on the Korean Won amount we would receive.
Tensions with North Korea could have an adverse effect on our business, financial condition, and results of operations, and the price per share of our Class A common stock.
Relations between Korea and North Korea have fluctuated over the years. Tension between Korea and North Korea may increase or change abruptly as a result of current and future events. In particular, there have been heightened security concerns in recent years stemming from North Korea’s nuclear weapon and ballistic missile programs as well as its hostile military actions against Korea.
North Korea’s economy also faces severe challenges, which may further aggravate social and political pressures within North Korea. Since April 2018, North Korea has held a series of bilateral summit meetings with Korea and the United States to discuss peace and denuclearization of the Korean peninsula. However, North Korea has since resumed its missile testing, heightening tensions, and the outlook of such discussions remains uncertain.
Further tensions in North Korean relations could develop due to a leadership crisis, breakdown in high-level inter-Korea contacts or military hostilities. Alternatively, tensions may be resolved through reconciliatory efforts, which may include peace talks, alleviation of sanctions or reunification. We cannot assure you that future negotiations will result in a final agreement on North Korea’s nuclear program, including critical details such as implementation and timing, or that the level of tensions between Korea and North Korea will not escalate. Any increase in the level of tension between Korea and North Korea, an outbreak in military hostilities or other actions or occurrences, could adversely affect our business, prospects, financial condition, and results of operations and could lead to a decline in the price per share of our Class A common stock.
New legislative proposals may expose our business to additional risks from litigation, regulation, and government investigations.
We are subject to changing laws and regulations everywhere we do business, including in Korea. For example, on September 28, 2020, the Korean Ministry of Justice announced (i) a proposed amendment to the Korean Commercial Code to adopt a punitive damages system that would apply generally to all areas of business, and (ii) a proposed bill to introduce a class action litigation system in Korea.
Previously, punitive or exemplary damages have been available in Korea only in specific business fields. The proposed legislation would broaden the potential availability of such damages. Similarly, the proposal relating to class actions would make such litigation applicable to a broader scope of cases, would allow for a Korean style discovery process, jury trials in many cases, and would apply to claims whose cause arose before the bill’s enactment.
Additionally, on September 28, 2020, the KFTC introduced a proposed bill entitled the “Fair Online Platform Intermediary Transactions Act.” This proposed act is intended to augment the existing legal framework under the Monopoly Regulation and Fair Trade Act of Korea to regulate competition and fairness issues arising in the business of online platforms. This proposed act would enhance liability of online platform operators to merchants, suppliers, and customers.
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Also, on January 8, 2021, the main session of the Korean National Assembly passed a draft Bill on Punishment for Serious Accidents, etc. (the “Serious Accidents Act”). The Serious Accidents Act seeks to impose enhanced liability (including criminal liability) on businesses, managers, and individuals who are responsible for causing loss of life by failing to fulfill duties relating to workplace safety and health or risk prevention. The Serious Accidents Act provides the potential for criminal punishment, public disclosure of punishment, and monetary damages, including punitive damages up to five times the actual damages suffered. The Serious Accidents Act would extend potential liability to a wider group of persons than under existing law, including those who oversee safety and health matters for the business concerned and also general managers of the business.
These are just some examples of how our business could be affected by changing regulations. If these proposals are enacted and implemented, our Korean subsidiary, Coupang Corp. (and its Korean subsidiaries), could face substantial costs and management could be required to spend significant time and attention on these matters, which would divert our focus from our core business. This could adversely affect our business, financial condition, and results of operations.
As Coupang Corp. is incorporated in Korea, it may be more difficult to enforce judgments obtained in courts outside Korea.
Coupang Corp. is incorporated in Korea, most of its directors and executive officers reside in Korea, and a substantial majority of its assets and the personal assets of its directors and executive officers are located in Korea. As a result, it may be more difficult for investors to effect service of process in the United States upon it or its directors or executive officers or to enforce against it or its directors or executive officers judgments obtained in U.S. courts predicated upon civil liability provisions of the federal or state securities laws of the United States or similar judgments obtained in other courts outside Korea. There is doubt as to the enforceability in Korean courts, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the federal and state securities laws of the United States.
Risks Related to Intellectual Property
We may not be able to adequately protect our intellectual property rights.
The protection of our intellectual property rights may require the expenditure of significant financial, managerial, and operational resources. The steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights. Any of our current or future patents, trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Our pending patent and trademark applications may never be granted. Additionally, the process of obtaining patent protection is expensive and time-consuming, and the amount of compensation for damages can be limited in certain jurisdictions. Further, we may not be able to prosecute or otherwise obtain all necessary or desirable patent or trademark applications at a reasonable cost or in a timely manner. Even if issued, these patents or trademarks may not adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent, trademark and other intellectual property rights are applied on a case-by-case basis and it is generally difficult to predict the results of any litigation relating to such matters. Additionally, others may independently develop or otherwise acquire equivalent, “design-around” or superior technology or intellectual property rights. We may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our intellectual property rights and other proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which may materially and adversely affect our business, financial condition, and results of operations.
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We may be accused of infringing intellectual property rights of third parties.
Although our terms of use prohibit the sale of counterfeit items or any items infringing upon third parties’ intellectual property rights in our marketplace and we have implemented measures to exclude goods that have been determined to violate our terms of use, we may not be able to detect and remove every item that may infringe on the intellectual property rights of third parties. As a result, we have received in the past, and may receive in the future, complaints alleging that certain items listed or sold on our apps or websites infringe upon the intellectual property rights of third parties, which could lead to actual disputes and lawsuits relating to intellectual property infringement.
The e-commerce industry is characterized by vigorous protection and pursuit of intellectual property rights, which has resulted in protracted and expensive litigation or investigations for many companies. We are currently party to litigation or disputes related to intellectual property rights of third parties, and we expect we will continue to be subject to such litigation, disputes, and investigations in the future, some of which may be material. Any intellectual property litigation or investigations to which we might become a party, or for which we are required to provide indemnification, may require us to, among other things, (i) cease selling certain products, (ii) make substantial payments for legal fees, settlement payments, or other costs or damages, (iii) change our processes or technology, obtain license(s), which may not be available on reasonable terms or at all, to use the relevant technology or process, or (iv) redesign the allegedly infringing processes to avoid infringement, misappropriation or violation.
Whether or not these claims are resolved in our favor, they could divert the resources of our management and adversely affect our reputation, business, financial condition, and results of operations.
Some of our software and systems contain open source software, which may pose particular risks to our proprietary software and solutions.
We use, and expect to continue to use, open source software in our software and systems. The licenses applicable to open source software typically require that the source code subject to the license be made available to the public and that any modifications or derivative works to open source software continue to be licensed under open source licenses. From time to time, we may face claims from third parties of infringement of their intellectual property rights, or demanding the release or license of the open source software or derivative works that we developed using such software (which could include our proprietary source code) or otherwise seeking to enforce the terms of the applicable open source license. We have not conducted an open source license review and may inadvertently use open source software in a manner that exposes us to claims of non-compliance with the applicable terms of such license, including claims for infringement of intellectual property rights or for breach of contract. These claims could result in litigation and could require us to purchase a costly license, publicly release the affected portions of our source code, be limited in the licensing of our technologies or cease offering the implicated solutions unless and until we can re-engineer them to avoid infringement or change the use of the implicated open source software. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties, indemnities, or other contractual protections with respect to the software (for example, non-infringement or functionality). Our use of open source software may also present additional security risks because the source code for open source software is publicly available, which may make it easier for hackers and other third parties to determine how to breach our apps or websites and systems that rely on open source software. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have an adverse effect on our business, financial condition, and results of operations.
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Risks Related to Taxes
Changes in the tax treatment of companies engaged in e-commerce may adversely affect the commercial use of our apps and websites and our financial results.
The Korean National Tax Service or the Korean Ministry of Economy and Finance may attempt to introduce new tax regimes in alignment with the Korean government’s recent international-tax overhaul attempt to address the tax challenges arising from the digitalization of the economy including e-commerce. This may lead the Korean government to impose additional or new regulations on our business or levy additional or new sales, income or other taxes relating to our activities. New or revised tax regulations may subject us or our customers to additional sales, income, and other taxes. We cannot predict the effect of current attempts to impose sales, income, or other taxes on e-commerce. New or revised taxes could increase the cost of doing business online and decrease the attractiveness of advertising and selling merchandise and services over the Internet. New taxes could also create significant increases in internal costs necessary to capture data and collect and remit taxes. Any of these events could have a material and adverse effect on our business, financial condition, and results of operations.
Because of our organizational structure, we may be subject to U.S. federal income tax on our non-U.S. income as well as non-U.S. withholding taxes on distributions from non-U.S. affiliates.
Upon completion of the Corporate Conversion, we will be organized as a Delaware corporation that is treated as a domestic corporation for U.S. federal income tax purposes. Under the rules of the Internal Revenue Code of 1986, as amended (the “Code”), we may be subject to U.S. federal income tax on a substantial portion of any income earned by our non-U.S. affiliates, regardless of whether that income is distributed to us, although it may be possible to offset some or all of any U.S. tax liability with credits for non-U.S. income taxes paid by the non-U.S. affiliates. These rules are extremely complicated, and their impact on us will depend on the results of our future operations and cannot be predicted or quantified at this time. In addition, although we do not anticipate paying any cash dividends in the foreseeable future, in the event that we were to pay dividends we will likely require distributions from our non-U.S. affiliates, which distributions could be subject to withholding taxes imposed by their respective jurisdictions.
Future changes to tax laws could materially and adversely affect us and reduce net returns to our stockholders.
Our tax treatment is subject to changes in tax laws, regulations, and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration, and the practices of tax authorities in jurisdictions in which we operate. The income tax rules in the jurisdictions in which we operate are constantly under review by taxing authorities and other governmental bodies. Changes to tax laws (which changes may have retroactive application) could adversely affect us or our stockholders. We are unable to predict what tax proposals may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our financial position and overall or effective tax rates in the future in countries where we have operations and where we or our subsidiaries are organized or resident for tax purposes, and increase the complexity, burden and cost of tax compliance. We urge investors to consult with their legal and tax advisers regarding the implication of potential changes in tax laws on an investment in our Class A common stock.
We may experience fluctuations in our tax obligations and effective tax rate, which could materially and adversely affect our results of operations.
We are subject to taxes in the United States, Korea, China, and Singapore. We record tax expenses based on current tax payments and our estimates of future tax payments, which may include reserves for estimates on uncertain tax positions. We may be subject to audit and the results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. As a result, we expect that throughout the year there could be ongoing variability in our quarterly tax rates as taxable
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events occur and exposures are re-evaluated. Further, our effective tax rate in a given financial statement period may be materially impacted by changes in tax laws, changes to existing accounting rules or regulations or by changes to our ownership or capital structures. Fluctuations in our tax obligations and effective tax rate could materially and adversely affect our results of business, financial condition, and results of operations.
Our Korean and U.S. affiliates’ ability to use net operating loss carryforwards may be limited.
Under the Korean tax law, net operating losses (“NOLs”) can be carried forward and deducted from taxable income for up to 10 years from the year in which the tax losses were incurred. While the utilization of NOL carryforwards per year is generally limited to 60% of taxable income in the year of utilization (except for certain small and medium-sized enterprises), there is no annual limitation on the use of NOLs in the event of an ownership change. As of December 31, 2020, our Korean affiliates had accumulated NOL carryforwards of approximately $3.1 billion. Our Korean affiliates’ ability to utilize its NOLs depends on their ability to generate sufficient taxable income to absorb the tax benefits within the carry-forward period.
As of December 31, 2020, our U.S. affiliates had U.S. federal NOL carryforwards of approximately $50 million due to prior period losses. Under the U.S. Tax Cuts and Jobs Act of 2017 as modified by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, U.S. federal NOLs incurred in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs will be limited to 80% of taxable income in taxable years beginning after December 31, 2020. In addition, under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, including credits, to offset its post-change taxable income or taxes may be limited. We have not completed an analysis to determine whether any such limitations have already been triggered or will be triggered as a result of this offering. We may also experience ownership changes as a result of future shifts in our share ownership, some of which are outside our control. Therefore, as a result of ownership changes, our U.S. affiliates’ ability to use current NOLs and other pre-change tax attributes to offset post-change taxable income or taxes could be subject to limitation. In addition, for U.S. federal income tax purposes, NOLs incurred in taxable years beginning prior to January 1, 2018 can be carried forward to the following twenty taxable years, and different periods may apply for U.S. state and local income tax purposes. We will be unable to use NOLs if we do not attain profitability sufficient to offset available NOLs prior to their expiration. For state and local income tax purposes in certain jurisdictions, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. For example, on June 29, 2020, the Governor of California signed into law the 2020 Budget Act which imposed limits on the usability of California state net operating losses to offset taxable income and the utilization of research tax credits to $5.0 million annually in tax years beginning after 2019 and before 2023.
Our international operations may subject us to greater than anticipated tax liabilities.
The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for pricing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a challenge or disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations. Our consolidated financial statements could fail to reflect adequate reserves to cover such a contingency. Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable
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connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.
Risks Related to Our Initial Public Offering and Ownership of Our Class A Common Stock
The dual class structure of our common stock has the effect of concentrating voting control with Bom Suk Kim, who upon consummation of this offering will hold 174,802,990 shares of our Class B common stock representing in the aggregate 76.7% of the voting power of our capital stock.
Immediately following completion of this offering, all of our shares of Class B common stock, which has 29 votes per share, will be beneficially held by Bom Suk Kim, our Founder and Chief Executive Officer. Our Class A common stock, which is the stock we are listing on the NYSE and which is being registered pursuant to the registration statement of which this prospectus forms a part, has one vote per share. Our Class A common stock and Class B common stock vote together as a single class on all matters, except as otherwise required by applicable law or our certificate of incorporation that will be effective upon completion of the Corporate Conversion. Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A common stock. In addition, each share of our Class B common stock will convert automatically into one share of our Class A common stock upon any transfer, whether or not for value, except certain transfers to entities, to the extent the transferor retains sole dispositive power and exclusive voting control with respect to the shares of Class B common stock, and certain other transfers described in our certificate of incorporation. Upon any conversion of shares of Class B common stock into shares of Class A common stock, the voting power of any existing holder of Class A common stock in any vote of the Class A common stock voting separately as a class will be diluted to the extent of the additional shares of Class A common stock issued as a result of the conversion, but because there will be fewer shares of Class B common stock outstanding as a result of such a conversion, the voting power of any existing holder of Class A common stock in any vote of all shares of capital stock voting together as a class will increase because there will be fewer shares of the higher vote Class B common stock outstanding. Because of the 29-to-one voting ratio between our Class B and Class A common stock, the Class B common stock held by Mr. Kim will represent, in the aggregate, 76.7% of the combined voting power of our capital stock. The control by Mr. Kim of a majority of the combined voting power will limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may defer, prevent, or discourage unsolicited acquisition proposals or offers for our capital stock that you may believe are in your best interest as one of our stockholders. Mr. Kim also has the ability to control our management and major strategic investments as a result of his position as our Chief Executive Officer. Although Mr. Kim owes a fiduciary duty to our stockholders as a board member and officer, as a stockholder, Mr. Kim is entitled to vote his shares in his own interest, which may not always be in the interest of our stockholders generally.
We cannot predict the effect our dual class structure may have on the price per share of our Class A common stock.
We cannot predict whether our dual class structure will result in a lower or more volatile price of our Class A common stock, in adverse publicity, or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices. In July 2017, FTSE Russell announced that it plans to require new constituents of its indices to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multiple-class share structures to certain of its indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. The dual class structure of our common stock would make us ineligible for inclusion in these and certain other indices and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track those
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indices would not invest in our Class A common stock. These policies are relatively new and it is unclear what effect, if any, they will have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may adversely affect our value compared to similar companies that are included in such indices. As a result, the price per share of our Class A common stock could decline or remain depressed.
In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our common stock could cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could cause the price per share of our Class A common stock to decline.
The market price of shares of our Class A common stock may be volatile, which could cause the value of your investment to decline.
Prior to this offering, our Class A common stock has not been sold in a public market. We cannot predict the extent to which a trading market will develop or how liquid that market might become. An active trading market for our Class A common stock may never develop or may not be sustained, which could adversely affect your ability to sell your Class A common stock and the market price for the Class A common stock. The initial public offering price for our Class A common stock was determined by negotiations between us, the selling stockholders and the underwriters and does not purport to be indicative of prices at which our Class A common stock will trade upon completion of this offering.
The stock market in general, and the market for stocks of technology companies in particular, has been highly volatile. As a result, the market price of shares of our Class A common stock is likely to be volatile, and investors in our Class A common stock may experience a decrease, which could be substantial, in the price of their Class A common stock or the loss of their entire investment for a number of reasons, including reasons unrelated to our operating performance or prospects. The market price of shares of our Class A common stock could be subject to wide fluctuations in response to a broad and diverse range of factors, including those described elsewhere in this “Risk Factors” section and this prospectus and the following:
actual or anticipated fluctuations in our results of operations;
overall performance of the equity markets and the economy as a whole;
changes in the financial projections we may provide to the public or our failure to meet these projections;
failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow us, or our failure to meet these estimates or the expectations of investors;
actual or anticipated changes in our growth rate relative to that of our competitors;
changes in the anticipated future size or growth rate of our addressable markets;
announcements of new products, or of acquisitions, strategic partnerships, joint ventures, or capital-raising activities or commitments, by us or by our competitors;
additions or departures of board members, management, or key personnel;
rumors and market speculation involving us or other companies in our industry;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business, including those related to data privacy and cyber security in Korea or globally;
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lawsuits or investigations threatened or filed against us;
other events or factors, including those resulting from war, incidents of terrorism, or responses to these events;
health epidemics, such as the COVID-19 pandemic, influenza, and other highly communicable diseases or viruses; and
sales or expectations with respect to sales of shares of our Class A common stock by us or our security holders.
In addition, stock markets with respect to newly public companies, particularly companies in the technology industry, have experienced significant price and volume fluctuations that have affected and continue to affect the stock prices of these companies. Stock prices of many companies, including technology companies, have fluctuated in a manner often unrelated to the operating performance of those companies. In the past, companies that have experienced volatility in the trading price for their stock have been subject to securities class action litigation. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business, financial condition, and results of operations.
An active public market for our Class A common stock may not develop or be sustained, and you may not be able to resell your shares of Class A common stock at or above the public offering price.
Prior to this offering, there has been no public market for shares of our Class A common stock, and an active public trading market for our shares may not develop or be sustained after this offering. We, the selling stockholders, and the representatives of the underwriters will determine the initial public offering price per share of our Class A common stock through negotiation. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering.
In addition, an active trading market may not develop following the consummation of this offering or, if it is developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications, or technologies using our shares as consideration.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
We currently intend to use the net proceeds from this offering for working capital, operating expenses, sales, and marketing expenses, to fund the growth of our business, and for capital expenditures. In addition, we may use a portion of the net proceeds to acquire complementary businesses, products, services, or technologies. However, we have no current understandings, agreements, or commitments for any specific material acquisitions at this time. We have not yet determined the manner in which we will allocate the net proceeds we receive from this offering and as a result, our management will have broad discretion in the allocation and use of the net proceeds. Our ultimate use of the net proceeds from this offering may vary substantially from the currently intended use. The failure by our management to allocate or use these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in a manner that may not yield a favorable return to investors. See “Use of Proceeds.”
Future sales of our Class A common stock in the public market could cause the price per share of our Class A common stock to decline.
Sales of a substantial number of shares of Class A common stock into the public market, particularly sales by our directors, executive officers, or principal stockholders, or the perception that these sales
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might occur, could cause the price of our Class A common stock to decline. Based upon the number of shares outstanding as of December 31, 2020, upon the closing of this offering, we will have outstanding a total of 1,531,911,152 shares of Class A common stock. Of these shares, all of the shares of our Class A common stock sold in this offering will be freely tradable, without restriction, in the public market immediately following this offering.
In connection with this offering, subject to certain customary exceptions, we, all of our directors, executive officers, and certain holders of our Class A common stock have entered into, or will enter into, lock-up agreements with the underwriters. The lock-up agreements will restrict our directors, executive officers, and certain holders of our Class A common stock from transferring shares of our Class A common stock and securities exercisable for or convertible into shares of our Class A common stock for a period of up to 180 days after the date of this prospectus, subject to certain exceptions, without the prior consent of Goldman Sachs & Co. LLC. Subject to compliance with Rule 144, shares of our Class A common stock as well as shares subject to outstanding options will be eligible for sale in the public market in the near future as set forth below, in accordance with the lock-up agreements:
Date Available for Sale in the Public Market
Condition
Number of Shares of Class A Common Stock Available for Sale
The sixth trading day following the date on the cover of this prospectus.
(a) The lock-up party was an employee of the Company (excluding officers of the Company who are subject to Section 16 of the Exchange Act and their affiliates) as of December 31, 2020 (collectively, the “Early Release Employee Group”) and (b) the closing price of the Class A common stock on the NYSE on the third trading day following the date on the cover of this prospectus equals or exceeds the initial public offering price of the shares to the public as set forth on the cover page of this prospectus (the “First Release Trigger”).
All outstanding shares held by the Early Release Employee Group as of February 26, 2021, including any shares held by any trust for the direct or indirect benefit of a lock-up party or of an immediate family member of the lock-up party, in each case to the extent received in their capacity as an employee of the Company. As of February 26, 2021, this represents an estimated 34.0 million shares.
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The twelfth (12th) trading day following the date on the cover of this prospectus.
(a) The lock-up party was a selling stockholder under this registration statement (other than Mr. Kim and his affiliates) (collectively, the “Selling Stockholder Group”) and (b) the closing price of the Class A common stock on the NYSE equals or exceeds 133% of the initial public offering price of the shares to the public as set forth on the cover page of this prospectus for both of (i) at least 5 trading days in the 10-day trading day period ending on the tenth (10th) trading day following the date on the cover of this prospectus and (ii) the tenth (10th) trading day.
A number of shares equal to 33% of the number equal to (i) the outstanding shares held by the Selling Stockholder Group prior to the initial public offering and shares to be issued to the Selling Stockholder Group in connection with the conversion of convertible notes in connection with this offering minus (ii) the number of shares sold by the Selling Stockholder Group in this offering. As of February 26, 2021, this represents an estimated 20.9 million shares (the “First Selling Stockholder Group Release Shares”).
Four trading days following the release of our first public release of quarterly financial results following the date on the cover of this prospectus.
(a) The lock-up party is a member of the Early Release Employee Group and (b) the closing price of the Class A common stock on the NYSE equals or exceeds the initial public offering price of the shares to the public as set forth on the cover page of this prospectus for both of (i) at least 5 trading days in the 10-day trading day period immediately prior to our first public release of quarterly financial results following the date on the cover of this prospectus and (ii) the first trading day immediately following the release of such financial results (such conditions set forth in (b), together, the “Third Release Trigger”).
All lock-up obligations with respect to the Early Release Employee Group end. As of February 26, 2021, this represents an estimated 24.6 million shares (not including the shares that released in connection with the First Release Trigger).


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Four trading days following the release of our first public release of quarterly financial results following the date on the cover of this prospectus.
(a) The lock-up party is an officer of the Company who is subject to Section 16 of the Exchange Act (other than Mr. Kim and his affiliates) and (b) the Third Release Trigger has been satisfied.
A number of shares equal to 25% of the outstanding securities held by the officers of the Company subject to Section 16 of the Exchange Act (other than Mr. Kim and his affiliates) as of the date of our first public release of quarterly financial results following the date on the cover of this prospectus, including any shares held by any trust for the direct or indirect benefit of a lock-up party or of an immediate family member of the lock-up party, in each case to the extent received in their capacity as an employee of the Company. As of February 26, 2021, this represents an estimated 0.7 million shares.
The ninetieth (90th) calendar day following the date on the cover of this prospectus.
(a) The lock-up party is (i) a director of the Company, other than Mr. Kim or (ii) a stockholder of the Company who held preferred units of the Company prior to this offering and who is not a member of the Selling Stockholder Group ((i) and (ii) collectively, the “Other Investor Group”) and (b) the closing price of the Class A common stock on the NYSE equals or exceeds 133% of the initial public offering price of the shares to the public as set forth on the cover page of this prospectus for both of (x) at least 5 trading days in the 10-day trading day period ending on the eighty eighth (88th) calendar day following the date on the cover of this prospectus and (y) the eighty eighth (88th) calendar day.
A number of shares equal to 10% of the outstanding shares held by the Other Investor Group prior to this offering and shares issued to the Other Investor Group in connection with the conversion of convertible notes in connection with this offering. As of February 26, 2021, this represents an estimated 128.6 million shares.

The second trading day following our public release of quarterly results for the second completed fiscal quarter following the date on the cover of this prospectus.
This represents the remainder of the securities.
In addition, as of December 31, 2020, approximately 86.5 million shares of Class A common stock that are either subject to outstanding options and restricted stock units (“RSUs”), after giving effect to the Corporate Conversion, or reserved for future issuance under our equity incentive plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. If these additional shares of
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Class A common stock are sold, or if it is perceived that they will be sold, in the public market, the price per share of our Class A common stock could decline.
After this offering, the holders of approximately 1,481.2 million shares of our Class A and Class B common stock, or approximately 86.8% of our total outstanding Class A and Class B common stock after this offering (based upon the number of shares outstanding as of December 31, 2020), will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to vesting schedules and to the lock-up agreements described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders could cause the price per share of our Class A common stock to decline.
Purchasers in this offering will immediately experience substantial dilution in the net tangible book value of their shares.
Assuming that the initial public offering price per share of our Class A common stock is $28.50 per share (which is the midpoint of the estimated price range appearing on the cover page of this prospectus), the initial public offering price per share of our Class A common stock will be substantially higher than the pro forma as adjusted net tangible book value per share of our Class A common stock immediately after this offering, calculated as described in the section titled “Dilution.” Therefore, if you purchase our Class A common stock in this offering, you will suffer immediate dilution in the pro forma as adjusted net tangible book value per share of $26.90 as of December 31, 2020, based on an assumed initial public offering price of our Class A common stock of $28.50 per share (which is the midpoint of the estimated price range appearing on the cover page of this prospectus). Furthermore, if options are exercised or RSUs are settled, if we issue awards to our employees under our equity incentive plans, or if we issue additional shares of our common stock, you could experience further dilution. See the section titled “Dilution” contained elsewhere in this prospectus for additional information.
We have not granted the underwriters an option to purchase additional shares of Class A common stock from us and the trading price of our Class A common stock may be more volatile as a result.
We have not granted the underwriters an option to purchase additional shares of Class A common stock from us at the initial public offering price less the underwriting discount, which is a common feature in initial public offerings. Without this option, the underwriters may choose not to engage in certain transactions that stabilize, maintain, or otherwise affect the market price of our Class A common stock, such as short sales, stabilizing transactions and purchases to cover positions created by short sales, to the extent they would have engaged in any such transactions had we granted the underwriters such an option. As a result, the price of our Class A common stock may be more volatile than it might have been had we granted the underwriters such an option. These fluctuations could cause you to lose part of your investment in our Class A common stock because you might be unable to sell your shares at or above the price you paid in this offering.
Our business and financial performance may differ from any projections that we disclose or any information that may be attributed to us by third parties.
From time to time, we may provide guidance via public disclosures regarding our projected business or financial performance. However, any such projections involve risks, assumptions, and uncertainties, and our actual results could differ materially from such projections. Factors that could cause or contribute to such differences include, but are not limited to, those identified in this “Risk Factors” section, some or all of which are not predictable or within our control. Other unknown or unpredictable factors also could adversely impact our performance, and we undertake no obligation to update or revise any projections, whether as a result of new information, future events, or otherwise. In addition, various news sources, bloggers, and other publishers often make statements regarding our historical or projected business or financial performance, and you should not rely on any such information even if it is attributed directly or indirectly to us.
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Our Class A common stock’s market price and trading volume could decline if securities or industry analysts do not publish research about our business, or if they publish unfavorable research.
Equity research analysts do not currently provide coverage of our Class A common stock, and we cannot assure that any equity research analysts will adequately provide research coverage of our Class A common stock after the listing of our Class A common stock on the NYSE. A lack of adequate research coverage may harm the liquidity and market price of our Class A common stock. To the extent equity research analysts do provide research coverage of our Class A common stock, we will not have any control over the content and opinions included in their reports. The market price of our Class A common stock could decline if one or more equity research analysts downgrade our stock or publish other unfavorable commentary or research. If one or more equity research analysts cease coverage of us, or fail to regularly publish reports on us, the demand for our Class A common stock could decrease, which in turn could cause the price per share of our Class A common stock or its trading volume to decline.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends in the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors, and could be restricted by regulatory capital requirements. In addition, the terms of our new revolving credit facility and our senior secured term loan facility contain restrictions on our ability to pay dividends. There are also certain regulations that restrict the ability of some of our subsidiaries to pay dividends to us. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Our certificate of incorporation will designate the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States as the exclusive forums for certain disputes between us and our stockholders, which will restrict our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Our certificate of incorporation, as will be in effect upon completion of the Corporate Conversion, will provide that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: any derivative action or proceeding brought on our behalf, any action asserting a breach of a fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation, or our bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. The provisions would not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us, our directors, officers, or other employees in a venue other than in the federal district courts of the United States. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our certificate of incorporation. This may require significant additional costs associated with
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resolving such action in other jurisdictions, and we cannot assure that the provisions will be enforced by a court in those other jurisdictions.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
Our certificate of incorporation and bylaws as will be in effect upon completion of the Corporate Conversion, provide that we will indemnify our directors, officers, and other agents, in each case to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the DGCL, our bylaws as will be in effect upon completion of the Corporate Conversion and our indemnification agreements that we have entered into with our directors and officers provide that:
we will indemnify our directors, officers, employees, agents, and other legal representatives (and persons serving in such capacities with other business enterprises at our request), to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;
we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that, if required by Delaware law, such directors or officers will undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;
we will not be obligated pursuant to our bylaws to indemnify any director, officer, employee, or agent with respect to proceedings initiated by such person, except with respect to proceedings authorized by our board of directors;
we may advance expenses, as incurred, to our other agents in connection with defending a proceeding, on such terms and conditions as our board of directors deems appropriate;
the rights conferred in our bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees, and agents and to obtain insurance to indemnify such persons; and
we may not amend, repeal, or modify our bylaw provisions to reduce our indemnification obligations to directors, officers, employees, and agents without the prior written consent of such person.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “toward,” “will,” or “would,” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
the COVID-19 pandemic and its impact on our business, operations, and the markets and communities in which we, our customers, suppliers, and merchants operate;
our expectations regarding our future operating and financial performance;
the continued growth of the e-commerce market and the increased acceptance of online transactions by potential customers;
the size of our addressable markets, market share, and market trends;
our ability to compete in our industry;
our ability to manage expansion into new markets and offerings;
our ability to effectively manage the continued growth of our workforce and operations;
the sufficiency of our cash, cash equivalents, and investments to meet our liquidity needs;
our ability to retain existing suppliers and merchants and to add new suppliers and merchants;
our suppliers’ and merchants’ ability to supply high-quality and compliant merchandise to our customers;
our relationship with our employees and the status of our workers;
our ability to maintain and improve our leading market position in Korea;
our ability to operate and manage the expansion of our fulfillment and delivery infrastructure;
the effects of seasonal trends on our results of operations;
our ability to effectively manage our exposure to fluctuations in foreign currency exchange rates;
our ability to attract, retain, and motivate skilled personnel, including key members of our senior management;
our ability to stay in compliance with laws and regulations, including tax laws, that currently apply or may become applicable to our business both in Korea and internationally and our expectations regarding various laws and restrictions that relate to our business;
the anticipated cost of food, energy, labor, and other costs associated with our business;
the increased expenses associated with being a public company;
our intended use of the net proceeds from this offering; and
the other factors set forth under “Risk Factors” in this prospectus.
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We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this prospectus. While we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.
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MARKET, INDUSTRY, AND OTHER DATA
This prospectus contains statistical data, estimates, and forecasts that are based on various sources, including independent industry publications or other publicly available information by City Population, Euromonitor International Limited (“Euromonitor”), International Data Corporation (“IDC”), Korea Forest Service, Pew Research Center, National Atlas, and The World Bank, as well as other information based on our internal sources. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors,” that could cause results to differ materially from those expressed in these publications and reports. The content of the below sources, except to the extent specifically set forth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein. Certain information in the text of this prospectus is contained in independent industry publications and publicly-available reports. Certain of these publications, studies, and reports were published before the COVID-19 pandemic and therefore do not reflect any impact of COVID-19 on any specific market or globally. The sources of these independent industry publications are identified by footnotes and are provided below:
Euromonitor International Limited, Retailing 2021, Consumer Foodservice 2020, Travel 2021, Value RSP including Sales Tax, fixed exchange rate, constant terms.
IDC, WW New Media Market Model, Q4 2020.
Additionally, we use data from Euromonitor, Economies and Consumers Annual Data (GDP and Total Population) and The World Bank, Gross Domestic Product 2019 (July 2020) for the Korean GDP figure. We also utilize multiple sources and assumptions to calculate our total addressable market (“TAM”) discussed in the sections titled “Prospectus Summary—Our Opportunity” and “Business—Our Opportunity,” including Euromonitor International Limited, Retailing 2021, Consumer Foodservice 2020, Travel 2021. Value RSP including Sales Tax, fixed exchange rate, constant terms for the grocery segment, and consumer foodservice segment TAMs; and IDC, Total Advertising Spending, Digital, and Traditional for the advertising TAM.
Information in this prospectus on our position as the largest product e-commerce player in Korea, our B2C logistics footprint in Korea, total SKU count, speed of our delivery service, and size of Coupang Eats is from independent market research carried out by Euromonitor International Limited in a report titled South Korea E-Commerce Market, which was commissioned by us. Materials in this prospectus include market research estimates based on various official published sources and trade opinion surveys conducted by Euromonitor, and has been prepared primarily as a research tool. Euromonitor believes that it used suitable sources of information and methodologies for this study, but due to the nature of the techniques and methodologies used in market research, Euromonitor cannot guarantee the accuracy of such information. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language.
Our population estimates are based on data from City Population’s Korean Cities statistics from February 2020. We calculate the population density based on data from Population Density (people per sq. km of land area) - Korea, Rep. (December 2018) and Land area (sq. km) – Korea, Rep. (December 2018) derived from The World Bank. The geographical estimates are based on data from Korea Forest Service and The World Bank.
We use data from the Pew Research Center, “Across 39 Countries, Three-Quarters Say They Use the Internet” to determine the smartphone penetration in Korea as of 2018.
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USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately $2.8 billion based on an assumed initial public offering price of $28.50 per share of Class A common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We will not receive any proceeds from the sale of shares of our Class A common stock by the selling stockholders in this offering.
A $1.00 increase or decrease in the assumed initial public offering price of $28.50 per share of Class A common stock, which is the midpoint of the range listed on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $102.4 million and $(97.1) million, respectively, assuming the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of Class A common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $27.8 million, assuming no change in the assumed initial public offering price of $28.50 per share of Class A common stock, which is the midpoint of the range listed on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us.
The principal purposes of this offering are to increase our capitalization and financial flexibility and to create a public market for our Class A common stock. We currently intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. We cannot specify with certainty all of the particular uses for the remaining net proceeds to us from this offering. We may also use a portion of the net proceeds for acquisitions of, or strategic investments in, complementary businesses, products, services, or technologies. However, we do not have any plans or commitments to enter into any material acquisitions or investments at this time. We will have broad discretion over how we use the net proceeds from this offering. We intend to invest the net proceeds from the offering that are not used as described above in investment-grade, interest-bearing instruments.
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CORPORATE CONVERSION 
We currently operate as a Delaware limited liability company under the name Coupang, LLC. Immediately prior to the effectiveness of the registration statement of which this prospectus forms a part, we will convert Coupang, LLC from a Delaware limited liability company to a Delaware corporation pursuant to a statutory conversion and change its name to Coupang, Inc. The purpose of the Corporate Conversion is to reorganize our corporate structure so that the entity that is offering Class A common stock to the public in this offering is a corporation rather than a limited liability company.
Pursuant to the applicable provisions of the plan of conversion, upon the completion of our Corporate Conversion:
all of our common units, profits interests, and convertible preferred units (other than those profits interests and convertible preferred units held by Bom Suk Kim) will be automatically converted into an equal number of shares of Class A common stock, with respect to the common units and convertible preferred units, and 22,114,201 shares of Class A common stock, with respect to such profits interests;
all of our profits interests and convertible preferred units held by Mr. Kim will be converted into an equal number of shares of Class B common stock;
outstanding options to purchase our common units granted under our Third Amended and Restated 2011 Equity Incentive Plan ("2011 Plan") will become options to purchase shares of our Class A common stock (or, in the case of our Chief Executive Officer, Class B common stock) for each common unit underlying such options immediately prior to the Corporate Conversion, at the same exercise price in effect prior to the Corporate Conversion; and
outstanding restricted equity units (“REUs”) granted under our 2011 Plan will become restricted stock units that, upon settlement, will settle as one share of our Class A common stock for each common unit underlying such REU immediately prior to the Corporation Conversion.
As a result of the Corporate Conversion, Coupang, Inc. will succeed to all of the property and assets of Coupang, LLC and will succeed to all of the debts and obligations of Coupang, LLC. Coupang, Inc. will be governed by a certificate of incorporation filed with the Delaware Secretary of State and bylaws, the material provisions of which are described under the heading “Description of Capital Stock.” On the effective date of the Corporate Conversion, each of our directors and officers will be as described elsewhere in this prospectus. See “Management.”
Except as otherwise noted herein, the consolidated financial statements included elsewhere in this prospectus are those of Coupang, LLC and its operations. We do not expect that the Corporate Conversion will have an effect on our results of operations.
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DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. In addition, in February 2021, we entered into a new revolving credit facility, which contains restrictions on our ability to pay dividends. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects, and other factors our board of directors may deem relevant. In addition, our ability to pay dividends may be restricted by any agreements we may enter into in the future.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2020 as follows:
on an actual basis;
on a pro forma basis to reflect (i) 1,260,155,178 shares of Class A common stock and 174,802,990 shares of Class B common stock, in each case, assuming the Corporate Conversion and the automatic conversion of (a) all of our common units, profits interests, and convertible preferred units (other than those profits interests and convertible preferred units held by Bom Suk Kim) into an equal number of shares of Class A common stock, with respect to such common units and convertible preferred units, and 22,114,201 shares of Class A common stock, with respect to such profits interests, and (b) all of our profits interests and convertible preferred units held by Mr. Kim into an equal number of shares of Class B common stock, (ii) equity-based compensation expense of $41.0 million associated with profits interests (for which the accelerated vesting condition will be satisfied upon completion of this offering) and restricted equity units (“REUs”) (for which the service-based vesting condition was satisfied and the qualifying performance-based liquidity event vesting condition will be satisfied upon completion of this offering, however, the shares will settle upon the earlier of (a) six months following the completion of this offering, (b) the release of the shares from sale restrictions as set forth in the section titled “Shares Eligible For Future Sale—Lock-Up Agreements,” or (c) March 15 of the calendar year following the completion of this offering), reflected as an increase in additional paid-in capital and accumulated deficit, and (iii) the issuance of 171,755,974 shares of our Class A common stock upon the closing of this offering and the automatic conversion of the principal and interest under the convertible notes issued in our 2018 convertible note financing (the “2018 Convertible Notes”) (such number of shares is estimated based on the anticipated number of shares of capital stock to be outstanding on the date of issuance); and
on a pro forma as adjusted basis, to give effect to (i) the pro forma adjustments set forth above and (ii) our issuance and sale of 100,000,000 shares of Class A common stock in this offering at an assumed initial public offering price of $28.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and offering expenses payable by us.
The pro forma and pro forma as adjusted information below is illustrative only, and our capitalization following the Corporate Conversion and closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this information together with our consolidated financial statements and the related notes included in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.
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As of December 31, 2020
ActualPro Forma
Pro Forma as Adjusted(1)
(in thousands, except unit/share data)
Cash and cash equivalents$1,251,455 $1,251,455 $4,005,875 
Convertible notes589,851 — — 
Redeemable convertible preferred units (no par value, 1,448,632,049 authorized, 1,372,898,443 issued, 1,329,464,982 outstanding as of December 31, 2020), no units authorized, issued and outstanding, pro forma and pro forma as adjusted3,465,611 — — 
Members’/stockholders’ (deficit) equity:
Common units (no par value, 264,166,544 authorized, 114,566,705 issued, and 105,822,205 outstanding as of December 31, 2020), no units authorized, issued and outstanding, pro forma and pro forma as adjusted54,950 — — 
Preferred stock, $0.0001 par value per share; no shares authorized, issued, and outstanding, actual; 2,000,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted— — — 
Class A common stock, $0.0001 par value per share; no shares authorized, issued or outstanding, actual; 10,000,000,000 shares authorized, 1,430,711,152 shares issued and outstanding, pro forma, and 1,531,911,152 shares issued and outstanding, pro forma as adjusted— 143 153 
Class B common stock, $0.0001 par value per share; no shares authorized, issued or outstanding, actual; 250,000,000 shares authorized, 176,002,990 shares issued and outstanding, pro forma and 174,802,990 shares issued and outstanding, pro forma as adjusted— 17 17 
Additional paid-in capital25,036 4,196,411 6,950,821 
Accumulated other comprehensive income (loss)(31,093)(31,093)(31,093)
Accumulated deficit(4,117,755)(4,178,878)(4,178,878)
Total members’/stockholders’ (deficit) equity(4,068,862)(13,400)2,741,020 
Total capitalization$(13,400)$(13,400)$2,741,020 
_____________
(1)Each $1.00 increase or decrease in the assumed initial public offering price of $28.50 per share of Class A common stock, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash, total members’/stockholders’ (deficit) equity, and total capitalization by approximately $102.4 million and $(97.1) million, respectively, assuming that the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of Class A common stock offered by us at the assumed initial public offering price per share would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, total members’/stockholders’ (deficit) equity, and total capitalization by approximately $27.8 million, assuming the assumed initial public offering price of $28.50 per share of Class A common stock remains the same, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We will not receive any proceeds from any sale of shares of our Class A common stock in this offering by the selling stockholders; accordingly, there is no impact upon the as adjusted capitalization for such shares.
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The number of shares of Class A common stock and Class B common stock that will be outstanding after this offering is based on (i) 1,260,155,178 shares of Class A common stock and 174,802,990 shares of Class B common stock, in each case, assuming the Corporate Conversion and, in connection therewith, the automatic conversion of (a) all of our outstanding common units, profits interests, and convertible preferred units (other than those profits interests and convertible preferred units held by Bom Suk Kim) into an equal number of Class A common stock, with respect to such common units and convertible preferred units, and 22,114,201 shares of Class A common stock, with respect to such profits interests, and (b) all of our profits interests and convertible preferred units held by Mr. Kim into an equal number of shares of our Class B common stock, and (ii) the issuance of 171,755,974 shares of our Class A common stock upon the closing of this offering and the automatic conversion of the principal and interest under the convertible notes issued in our 2018 convertible note financing (the “2018 Convertible Notes”) (such number of shares is estimated based on the anticipated number of shares of capital stock to be outstanding on the date of issuance), and excludes:
65,703,982 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock issued under our Third Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”) with a weighted-average exercise price of $1.95 per share;
20,765,071 shares of our Class A common stock issuable upon the vesting and settlement of REUs outstanding under our 2011 Plan; and
215,103,732 shares of our Class A common stock reserved for future issuance under our 2021 Equity Incentive Plan (the “2021 Plan”), including 137,103,680 new shares plus the number of shares (not to exceed 78,000,052 shares) (i) that remain available for grant of future awards under our 2011 Plan, which shares will be added to the shares reserved under our 2021 Plan and will cease to be available for issuance under our 2011 Plan at the time our 2021 Plan becomes effective and (ii) any shares underlying outstanding stock awards granted under our 2011 Plan that expire, or are forfeited, cancelled, withheld, or reacquired, as well as any annual automatic increases in the number of shares of Class A common stock reserved for future issuance under our 2021 Plan.
Upon the execution and delivery of the underwriting agreement related to this offering, any remaining shares available for issuance under our 2011 Plan will become reserved for future issuance as Class A common stock under our 2021 Plan, and we will cease granting awards under our 2011 Plan.
Our 2021 Plan provides for annual automatic increases in the number of shares reserved thereunder.
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DILUTION
If you invest in our Class A common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of Class A common stock and the pro forma as adjusted net tangible book value per share of our Class A common stock immediately after this offering after giving effect to the Corporate Conversion.
Our historical net tangible book value as of December 31, 2020 was $(621.6) million, or $(5.87) per common unit. Historical net tangible book value per unit is determined by dividing our total tangible assets less our total liabilities less our convertible preferred units by the number of our common units.
Our pro forma net tangible book value as of December 31, 2020 was $(31.7) million, or $(0.02) per share. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of shares of our Class A common stock outstanding as of December 31, 2020, after giving effect to (i) our Corporate Conversion, and in connection therewith, the automatic conversion of (a) all of our common units, profits interests, and convertible preferred units (other than those profits interests and convertible preferred units held by Bom Suk Kim) into an equal number of shares of Class A common stock, with respect to such common units and convertible preferred units, and 22,114,201 shares of Class A common stock, with respect to such profits interests, and (b) all of our profits interests and convertible preferred units held by Mr. Kim into an equal number of shares of Class B common stock, (ii) equity-based compensation expense of $41.0 million associated with profits interests (for which the accelerated vesting condition will be satisfied upon completion of this offering) and restricted equity units (“REUs”) (for which the service-based vesting condition was satisfied and the qualifying performance-based liquidity event vesting condition will be satisfied upon the completion of this offering, however, the shares will settle upon the earlier of (a) six months following the completion of this offering, (b) the release of the shares from sale restrictions as set forth in the section titled “Shares Eligible For Future Sale—Lock-Up Agreements,” or (c) March 15 of the calendar year following the completion of this offering), in each case, outstanding as of December 31, 2020, reflected as an increase in additional paid-in capital and accumulated deficit, and (iii) the issuance of 171,755,974 shares of our Class A common stock upon the closing of this offering and the automatic conversion of the principal and interest under the convertible notes issued in our 2018 convertible note financing (the “2018 Convertible Notes”) (such number of shares is estimated based on the anticipated number of shares of capital stock to be outstanding on the date of issuance).
After giving further effect to the sale of 100,000,000 shares of Class A common stock that we are offering at an assumed initial public offering price of $28.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2020 would have been approximately $2.7 billion, or approximately $1.60 per share. This amount represents an immediate increase in pro forma net tangible book value of $1.62 per share to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value of approximately $26.90 per share to new investors purchasing shares of Class A common stock in this offering.
Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share of Class A common stock after this offering from the initial public offering price per
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share paid by new investors for a share of Class A common stock. The following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share$28.50 
Historical net tangible book value (deficit) per unit as of December 31, 2020$(5.87)
Increase per share attributable to the pro forma adjustments described above5.85 
Pro forma net tangible book value per share as of December 31, 2020(0.02)
Increase in pro forma net tangible book value per share attributable to this offering1.62 
Pro forma as adjusted net tangible book value per share after this offering1.60 
Dilution in pro forma as adjusted net tangible book value per share to new investors in this offering$26.90 
The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. Each $1.00 increase (decrease) in the assumed initial public offering price of $28.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $0.06, and dilution in pro forma as adjusted net tangible book value per share to new investors by approximately $0.94 per share, in each case, assuming that the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us. Each increase (decrease) of 1.0 million shares in the number of shares of Class A common stock offered by us would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by approximately $0.02 per share and decrease (increase) the dilution to investors participating in this offering by approximately $0.02 per share, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us. The following table summarizes, on the pro forma as adjusted basis described above, as of December 31, 2020, the differences between the number of shares of Class A common stock and Class B common stock purchased from us by our existing stockholders and Class A common stock by new investors purchasing shares in this offering, the total consideration paid to us in cash and the average price per share paid by existing stockholders for shares of Class A common stock and Class B common stock issued prior to this offering, and the price to be paid by new investors for shares of Class A common stock in this offering. The calculation below is based on the assumed initial public offering price of $28.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and offering expenses payable by us.
Shares PurchasedTotal ConsiderationAverage Price Per Share
NumberPercent
Amount
 (in thousands)
Percent
Existing stockholders1,606,714,14294 %$3,624,625 56 %$2.26 
New investors100,000,000%2,850,000 44 %$28.50 
Total1,706,714,142100 %$6,474,625 100 %
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Sales by the selling stockholders in this offering will cause the number of shares held by existing stockholders to be reduced to 1,586,714,142 shares, or 93% of the total number of shares outstanding following the completion of this offering, and will increase the number of shares held by new investors to 120,000,000 shares, or 7% of the total number of shares outstanding following the completion of this offering.
The number of shares of Class A common stock and Class B common stock that will be outstanding after this offering is based on (i) 1,260,155,178 shares of Class A common stock and 174,802,990 shares of Class B common stock, in each case, assuming the Corporate Conversion and, in connection therewith, the automatic conversion of (a) all of our outstanding common units, profits interests, and convertible preferred units (other than those profits interests and convertible preferred units held by Bom Suk Kim) into an equal number of Class A common stock, with respect to such common units and convertible preferred units, and 22,114,201 shares of Class A common stock, with respect to such profits interests, and (b) all of our profits interests and convertible preferred units held by Mr. Kim into an equal number of shares of our Class B common stock, and (ii) the issuance of 171,755,974 shares of our Class A common stock upon the closing of this offering and the automatic conversion of the principal and interest under the convertible notes issued in our 2018 convertible note financing (the “2018 Convertible Notes”) (such number of shares is estimated based on the anticipated number of shares of capital stock to be outstanding on the date of issuance), and excludes:
65,703,982 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock issued under our Third Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”), with a weighted-average exercise price of $1.95 per share;
20,765,071 shares of our Class A common stock issuable upon the vesting and settlement of REUs outstanding under our 2011 Plan; and
215,103,732 shares of our Class A common stock reserved for future issuance under our 2021 Equity Incentive Plan (the “2021 Plan”), including 137,103,680 new shares plus the number of shares (not to exceed 78,000,052 shares) (i) that remain available for grant of future awards under our 2011 Plan, which shares will be added to the shares reserved under our 2021 Plan and will cease to be available for issuance under our 2011 Plan at the time our 2021 Plan becomes effective and (ii) any shares underlying outstanding stock awards granted under our 2011 Plan that expire, or are forfeited, cancelled, withheld, or reacquired, as well as any annual automatic increases in the number of shares of Class A common stock reserved for future issuance under our 2021 Plan.
To the extent any outstanding options are exercised or outstanding restricted stock units (“RSUs”) are settled, new equity awards (including options or RSUs) are issued under our equity incentive plan or new profits interests are issued under our profits interest plan, or we issue additional capital stock or convertible debt securities in the future, there will be further dilution to investors participating in this offering. If all of such outstanding vested options had been exercised as of December 31, 2020, the pro forma as adjusted net tangible book value per share after this offering would be $1.61, and total decrease in dilution per share to new investors would be $0.01. If all of such outstanding vested REUs had been settled as of December 31, 2020, the pro forma as adjusted net tangible book value per share after this offering would be $1.58, and total dilution per share to new investors would be $0.02. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The selected consolidated statements of operations data for the years ended December 31, 2020, 2019, and 2018 (except pro forma data), the consolidated statement of cash flows data for the years ended December 31, 2020, 2019, and 2018, and the selected consolidated balance sheet data as of December 31, 2020 and 2019 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our selected consolidated statements of operations data for the years ended December 31, 2017 and 2016, the consolidated statements of cash flows data for the years ended December 31, 2017 and 2016, and the consolidated balance sheet data as of December 31, 2018, 2017, and 2016 have been derived from our consolidated financial statements not included in this prospectus.
You should read the consolidated financial data set forth below in conjunction with our consolidated financial statements and the accompanying notes and the information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.
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Year Ended December 31,
20202019201820172016
(in thousands, except per unit data)
Consolidated Statements of Operations Data:
Net retail sales$11,045,096 $5,787,090 $3,799,129 $2,232,088 $1,489,860 
Net other revenue922,243 486,173 254,460 171,539 184,693 
Total net revenues(1)
11,967,339 6,273,263 4,053,589 2,403,627 1,674,553 
Cost of sales9,981,159 5,240,159 3,864,205 2,206,184 1,544,040 
Operating, general and administrative2,513,912 1,676,941 1,241,790 783,479 629,216 
Total operating cost and expenses12,495,071 6,917,100 5,105,995 2,989,663 2,173,256 
Operating loss(527,732)(643,837)(1,052,406)(586,036)(498,703)
Interest income10,991 19,135 3,925 3,244 3,296 
Interest expense(107,762)(96,907)(70,949)(14,052)(2,090)
Other income (expense), net149,900 22,569 24,177 (19,815)3,140 
Loss before income taxes(474,603)(699,040)(1,095,253)(616,659)(494,357)
Income tax expense (benefit)292 (241)2,279 342 192 
Net loss$(474,895)$(698,799)$(1,097,532)$(617,001)$(494,549)
Net loss attributable to common unitholders$(567,629)$(770,214)$(1,097,532)$(617,001)$(494,549)
Net loss attributable to common unitholders per unit, basic and diluted$(7.23)$(11.14)$(16.60)$(10.87)$(11.24)
Weighted average number of common units outstanding used in computing per unit amounts, basic and diluted78,543 69,125 66,117 56,780 43,994 
Pro forma net loss attributable to common stockholders per share, basic and diluted(2)
$(0.37)
Pro forma weighted average number of shares of common stock outstanding used in computing per share amounts, basic and diluted1,599,739 
Consolidated Statements of Cash Flows Data:
Net cash provided by (used in) operating activities
$301,554 $(311,843)$(694,465)$(404,690)$(419,968)
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December 31,
2020
2019
2018
2017
2016
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents$1,251,455 $1,222,276 $611,504 $173,771 $330,115 
Total assets5,067,332 3,229,854 1,652,144 1,028,735 880,901 
Working capital (deficit)(3)
(891,996)273,250 (307,396)(284,938)48,360 
Long-term debt353,342 269,949 265,573 276,368 34,743 
Convertible notes 589,851 498,817 422,872 — — 
Derivative instrument— 149,830 113,048 — — 
Total liabilities5,670,583 3,294,212 2,404,754 1,264,205 583,104 
Redeemable convertible preferred units3,465,611 3,468,554 2,019,716 1,477,654 1,407,671 
Additional paid-in capital25,036 25,036 25,036 25,036 25,036 
Accumulated deficit(4,117,755)(3,565,590)(2,865,093)(1,767,561)(1,150,560)
Total members’/stockholders' (deficit) equity$(4,068,862)$(3,532,912)$(2,772,326)$(1,713,124)$(1,109,874)
_____________
(1)On January 1, 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” on a full retrospective basis as of January 1, 2017. Our consolidated financial statements for 2016 continue to reflect revenue accounting under ASU No. 2009-13, “Revenue Recognition (Topic 605).”
(2)See Notes 2 and 15 to our audited consolidated financial statements included elsewhere in this prospectus for a description of the method used to calculate basic and diluted pro forma net loss attributable to common stockholders per share.
(3)Working capital (deficit) is defined as current assets less current liabilities.
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, management believes that certain non-GAAP financial measures provide investors with additional useful information in evaluating our performance. These non-GAAP financial measures may be different than similarly titled measures used by other companies.
Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. Non-GAAP measures have limitations in that they do not reflect all the amounts associated with our results of operations as determined in accordance with GAAP. These measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.
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Free Cash Flow
Free Cash Flow is defined as cash flow from operations less capital expenditures plus proceeds from sale of property and equipment. We believe that Free Cash Flow is an additional and useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our core operations that, after capital expenditures, can be used for strategic initiatives, including investing in our business and strengthening our balance sheet. Free Cash Flow has limitations as an analytical tool and should not be considered in isolation or as substitutes for analysis of other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of Free Cash Flow are that it may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure. We expect our Free Cash Flow to fluctuate in future periods as we invest in our business to support our plans for growth. Please refer to the reconciliation below of Free Cash Flow to net cash used in operating activities, the most directly comparable GAAP financial measure.
Included below is a reconciliation of our net cash used in operating activities to Free Cash Flow for each of the periods indicated:

Year Ended December 31,
202020192018
(in thousands)
Net cash provided by (used in) operating activities$301,554 $(311,843)$(694,465)
Adjustments:
Capital expenditures(484,630)(217,823)(93,401)
Proceeds from sale of property and equipment507 3,543 265 
Free Cash Flow$(182,569)$(526,123)$(787,601)
Net cash used in investing activities$(520,654)$(218,224)$(91,834)
Net cash provided by financing activities$178,502 $1,184,104 $1,242,952 
EBITDA and EBITDA Margin
EBITDA is defined as net income/(loss) for a period before interest expense, interest income, income tax expense/(benefit), depreciation and amortization. EBITDA Margin is defined as EBITDA as a percentage of total net revenues. We have included EBITDA and EBITDA Margin in this prospectus because they are key measures we use to evaluate and assess our performance, allocate internal resources, prepare and approve our annual budget, and develop operating plans. We believe EBITDA and EBITDA Margin are frequently used by investors and other interested parties in evaluating companies in the e-commerce industry for period-to-period comparisons as they remove the impact of non-cash items and certain variable charges. However, other companies may calculate EBITDA and EBITDA Margin in a manner different from ours and therefore they may not be directly comparable to similar terms used by other companies. EBITDA and EBITDA Margin are not measures of financial performance under GAAP and should not be considered as alternatives to cash flow from operating activities or as measures of liquidity or alternatives to net income/(loss) as indicators of operating performance or any other measures of performance derived in accordance with GAAP. EBITDA and EBITDA Margin have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.
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A reconciliation of our net loss to EBITDA for each of the periods indicated is below:
Year Ended December 31,
202020192018
(in thousands)
Total net revenues$11,967,339 $6,273,263 $4,053,589 
Net loss(474,895)(698,799)(1,097,532)
Net loss margin(4.0)%(11.1)%(27.1)%
Adjustments:
Depreciation and amortization127,519 70,908 53,616 
Interest expense107,762 96,907 70,949 
Interest income(10,991)(19,135)(3,925)
Income tax expense (benefit)292 (241)2,279 
EBITDA$(250,313)$(550,360)$(974,613)
EBITDA Margin(2.1)%(8.8)%(24.0)%
Constant Currency Revenue and Constant Currency Revenue Growth
The effect of currency exchange rates on our business is an important factor in understanding period to period comparisons. Our financial reporting currency is the U.S. dollar and changes in foreign exchange rates can significantly affect our reported results and consolidated trends. For example, our business generates sales predominantly in Korean Won, which are favorably affected as the U.S. dollar weakens relative to the Korean Won, and unfavorably affected as the U.S. dollar strengthens relative to the Korean Won. We use non-GAAP constant currency revenue and constant currency revenue growth for financial and operational decision-making and as a means to evaluate comparisons between periods. We believe the presentation of results on a constant currency basis in addition to GAAP results helps improve the ability to understand our performance because they exclude the effects of foreign currency volatility that are not indicative of our actual results of operations.
Constant currency information compares results between periods as if exchange rates had remained constant. We define constant currency revenue as total revenue excluding the effect of foreign exchange rate movements, and use it to determine the constant currency revenue growth on a comparative basis. Constant currency revenue is calculated by translating current period revenues using the prior period exchange rate. Constant currency revenue growth (as a percentage) is calculated by determining the increase in current period revenue over prior period revenue, where current period foreign currency revenue is translated using prior period exchange rates.
These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with GAAP.
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A reconciliation of our constant currency revenue for each of the periods indicated is below (in thousands):
Year Ended December 31,
202020192018
(in thousands)
Total net revenues$11,967,339 $6,273,263 $4,053,589 
Total net revenues growth90.8 %54.8 %68.6 %
Adjustment:
Exchange rate effect147,840 372,587 (109,473)
Total net revenue, constant currency$12,115,179 $6,645,850 $3,944,116 
Total net revenue, constant currency growth93.1 %63.9 %64.1 %

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section titled “Selected Consolidated Financial and Operating Data” and the audited historical consolidated financial statements and related notes therein included elsewhere in this prospectus, as well as the discussion in the “Business” section of this prospectus. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions, and projections about our industry, business, and future financial results. You should review the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Unless the context otherwise requires, we use the terms “Coupang,” the “Company,” “we,” “our,” “us,” or similar terms in this prospectus to refer to Coupang, Inc. and, where appropriate, our consolidated subsidiaries. Our fiscal year ends on December 31. Our reporting currency is the U.S. dollar.
Overview
We are the largest product e-commerce player in Korea.21 We believe that we are the preeminent online destination for e-commerce in the market because of our broad selection, low prices, and exceptional convenience.
Since 2013, we have allocated billions of dollars to build an end-to-end integrated network of technology and infrastructure, which drive our ability to deliver a superior customer experience, launch new offerings, and offer effective merchant solutions. Our complete integration enables us to control and improve the entire experience, from the customer app to the delivery of the order at the customer’s door.
We operate the largest B2C logistics footprint as compared to other product e-commerce players in Korea.22 As of December 31, 2020, we had over 100 fulfillment and logistics centers in over 30 cities, encompassing over 25 million square feet. We also have the largest directly employed delivery fleet in Korea, consisting of over 15,000 drivers as of December 31, 2020, who utilize our proprietary software and custom-designed trucks. Our distribution network and last-mile delivery logistics are orchestrated by technology which enables full supply chain visibility and control. We also leverage our machine learning systems to drive personalization for customers, optimize inventory procurement and risk, enhance our relationship with suppliers, and deliver consistently low prices to our customers.
Our unique end-to-end fulfillment, logistics, and technology network enables Rocket Delivery, which provides free, next-day delivery for orders placed anytime of the day, even seconds before midnight—across millions of products. We also deliver 365 days a year, over 65 days more than any other major third-party logistics company in Korea. We have the fastest delivery service compared to other top
21 Euromonitor International Limited, Retailing 2021. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, retail value RSP, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
22 Euromonitor International Limited. “Logistics footprint” is defined as the number of logistics centers, including fulfillment centers, logistics centers, and delivery hubs owned by the companies in the report. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, number of logistics centers, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
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product e-commerce players in Korea.23 Under the promise of Rocket Delivery, we have made available to customers the largest number of total SKU count for owned-inventory products compared to other product e-commerce players in Korea24—millions of SKUs—which requires significant procurement expertise to recruit and source from local and international suppliers.
In addition to superior experience, we believe we also offer customers the lowest prices for our owned inventory selection. Our structural advantages from complete end-to-end integration, investments in technology, and scale economies generate higher efficiencies that allow us to pass savings to customers in the form of lower prices. We also source a large portion of merchandise directly from manufacturers, which can contribute to better pricing for our customers.
In 2019, we launched our Rocket WOW membership program for a flat monthly fee. It began by offering unlimited free shipping with no minimum spend for the millions of products available on Rocket Delivery. Since launch, Rocket WOW membership has expanded to include Rocket Fresh, the leading nationwide online grocery service. Delivery is made within hours via overnight and same-day delivery: Rocket Dawn Delivery orders placed up until midnight are delivered by 7 AM and Rocket Same-Day Delivery orders placed up until 10 AM are delivered the same day. Today, in addition to groceries, Rocket WOW members can enjoy expedited shipping via Rocket Dawn Delivery and Rocket Same-Day Delivery for millions of items across almost every category. The scale of the Rocket WOW membership program provides us with a highly engaged customer base, as demonstrated by our success in launching Rocket Fresh. We intend to continue enhancing the value proposition of Rocket WOW membership for our customers in the years to come, and believe that we will be able to continue launching new offerings that cater to this attractive membership base.
In addition to our owned-inventory selection, we offer hundreds of millions of SKUs sourced from over 200,000 merchants on our marketplace. Our search technology produces a simplified experience that overcomes the lack of standardization and duplicate listings by leveraging our product knowledge graph to show more unique products in search results, helping customers find, compare, and make purchasing decisions easily.
We also provide differentiated tools and services for merchants and suppliers to improve the customer experience and grow their sales. For example, merchants can choose to sell inventory to Coupang on our Fulfillment & Logistics by Coupang (“FLC”) program, which improves customer experience with Rocket Delivery and, as a result, generates higher sales.
Whereas existing food delivery models in Korea are predominantly lead generation, Coupang Eats is the largest online food delivery service which delivers food to customers using only delivery partners directly contracted by us.25
Our business has grown substantially in recent years, achieving significant scale and increasing operating leverage:
23 Euromonitor International Limited. Fastest delivery service is measured using the difference in time (hours and minutes) from when the customer places an order online to the time the order arrives at the customer’s residence, the result is based on averages from an online delivery tracking study with 1,000 transactions in the Seoul metropolitan area across the top 5 product e-commerce players in the Korean market. “Product e-commerce” is defined the same as the e-commerce definition in Euromonitor Passport Retailing 2021. “Top 5 product e-commerce players” as listed in Euromonitor Passport Retailing 2021, delivery hours, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
24 Euromonitor International Limited. Total SKU count for owned inventory products listed on our e-commerce apps and websites. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, listed product volume, 2021 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
25 Euromonitor International Limited. “Online food delivery service” is defined the same as the Passport Retailing 2021 definition. 100% of sales revenue generated by Coupang Eats is delivered through delivery partners directly contracted by us, while other food delivery providers utilize a mix of delivery partners directly commissioned by restaurants and delivery partners directly contracted by the respective companies, transaction value, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
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Our total net revenues were $12.0 billion in 2020, up 90.8% (93.1% on a constant currency basis) over 2019.26
Our Active Customer base grew to approximately 14.8 million in the quarter ended December 31, 2020 from approximately 11.8 million in the quarter ended December 31, 2019, an increase of 25.9%.
Our Net Revenues per Active Customer increased to approximately $256 for the quarter ended December 31, 2020 from approximately $161 for the quarter ended December 31, 2019, an increase of 59.0%.
Our gross profit27 was $2.0 billion in 2020, up 92.3% over 2019.
Our operating loss was $(0.5) billion in 2020 and $(0.6) billion in 2019. Our operating margin improved to (4.4)% in 2020 from (10.3)% in 2019.
Our net loss was $(0.5) billion in 2020 and $(0.7) billion in 2019. Our EBITDA28 was $(0.3) billion in 2020 and $(0.6) billion in 2019.
Our cash provided by (used in) operating activities was $0.3 billion in 2020 and $(0.3) billion in 2019. Our Free Cash Flow29 was $(0.2) billion in 2020 and $(0.5) billion in 2019.
Our Business Model
We launched as a marketplace in 2010 to enable merchants to leverage technology and innovation to grow and compete. In order to improve the customer experience with end-to-end control, we launched our owned-inventory selection in 2013 and Rocket Delivery in 2014, spending billions of dollars to build our own end-to-end integrated network of technology and infrastructure with fulfillment and last-mile delivery capabilities, supported by data driven insights and a diversified supply chain. Our owned-inventory and third-party selections continue to complement each other to expand our product assortment and to leverage the technology and infrastructure we have built.
We will also continue to launch new offerings to better serve our customers. We expanded our business through our grocery offering, Rocket Fresh, our logistics food delivery offering, Coupang Eats, and our digital financial services, Coupang Pay. Today, our network and systems support our owned-inventory selection, our marketplace, Rocket Delivery, Rocket WOW membership, Rocket Fresh, and Coupang Eats, and Coupang Pay.
We believe the true measure of our success will be shareholder value created over the long term. Our long-term investments in building a differentiated technology-orchestrated network and customer-facing functionality have helped build a business that we expect will deliver significant growth and cash flows at scale. We have in turn reinvested to expand into new offerings successfully, such as with our owned-inventory selection, Rocket WOW membership, Rocket Fresh, and Coupang Eats, among others. We will continue to reinvest cash flows generated by our established offerings into new initiatives and innovations for our customers. We will choose to invest and maximize value for customers and shareholders in the long term over optimizing our short-term results.
26 For additional information about these non-GAAP financial measures, including reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see the section titled “Selected Consolidated Financial and Operating Data—Non-GAAP Financial Measures.”
27 Gross profit is calculated as total net revenues minus cost of sales.
28 For additional information about these non-GAAP financial measures, including reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see the section titled “Selected Consolidated Financial and Operating Data—Non-GAAP Financial Measures.”
29 For additional information about these non-GAAP financial measures, including reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see the section titled “Selected Consolidated Financial and Operating Data—Non-GAAP Financial Measures.”
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Our long-term goal is to maximize Free Cash Flow while minimizing shareholder dilution. Today, a significant portion of our current capital expenditures represents investment in capacity for future growth, and, due to our ambitious plans for growth, we expect to continue to make large capital expenditures in the near future. Because the purchase of property and equipment may not be directly correlated to the underlying performance of our business operations at the time of incurrence of such costs, we believe it is useful to look at operating cash flow as a barometer of the current health of our business and our ability to generate long-term Free Cash Flow per share.
In order to maximize sustainable, long-term Free Cash Flow per share, we plan to prioritize:
maximizing long-term revenue generation by increasing sales of products and services to our customers;
continuing to drive operating leverage by reducing variable costs and minimizing growth in fixed costs as we scale. We seek to decrease our variable costs by improving supply-chain and operational efficiencies. We also seek to minimize unnecessary growth in fixed costs by investing in technology, improving process efficiencies, and driving leverage through economies of scale; and
minimizing dilution to our investors by limiting additional issuances of equity and equity-like securities and, thereby, increasing our income and Free Cash Flow per share.
As we scale, we will continue to innovate for our customers by reinvesting profits from our established offerings to launch new products and service benefits.
Key Business Metrics and Non-GAAP Financial Measures
We review the key business and financial metrics discussed below. We use these measures to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
Key Business Metrics
Active Customers
As of the last date of each reported period, we determine our number of Active Customers by counting the total number of individual customers who have ordered at least once directly from our apps and websites during the relevant period. A customer is anyone who has created an account on our apps or websites, identified by a unique email address. The change in Active Customers in a reported period captures both the inflow of new customers as well as the outflow of existing customers who have not made a purchase in the period. We view the number of Active Customers as a key indicator of our potential for growth in total net revenues, the reach of our network, the awareness of our brand, and the engagement of our customers.
Three Months Ended
December 31, 2020December 31, 2019December 31, 2018
(in thousands)
Active Customers14,850 11,791 9,163 

Net Revenues per Active Customer
Net Revenues per Active Customer is the total net revenues generated in a period divided by the total number of Active Customers in that period. A key driver of growth is increasing the frequency and the level of spend of Active Customers who are shopping on our apps or websites. We therefore view Net
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Revenues per Active Customer as a key indicator of engagement and retention of our customers and our success in increasing the share of wallet.
Three Months Ended
December 31, 2020December 31, 2019December 31, 2018
Net Revenues per Active Customer$256 $161 $127 

Non-GAAP Financial Measures30
Free Cash Flow
We believe that Free Cash Flow is an additional and useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our core operations that, after capital expenditures, can be used for strategic initiatives, including investing in our business and strengthening our balance sheet.
Year Ended December 31,
2020
20192018
(in thousands)
Free Cash Flow
$(182,569)$(526,123)$(787,601)
EBITDA and EBITDA Margin
We believe EBITDA and EBITDA Margin are frequently used by investors and other interested parties in evaluating companies in the e-commerce industry for period-to-period comparisons as they remove the impact of non-cash items and certain variable charges.
Year Ended December 31,
2020
20192018
(in thousands)
EBITDA
$(250,313)$(550,360)$(974,613)
EBITDA Margin(2.1)%(8.8)%(24.0)%
Constant Currency Revenue and Constant Currency Revenue Growth
We believe the presentation of results on a constant currency basis in addition to GAAP results helps improve the ability to understand our performance because they exclude the effects of foreign currency volatility that are not indicative of our actual results of operations.
Year Ended December 31,
202020192018
(in thousands)
Total net revenue, constant currency$12,115,179$6,645,850$3,944,116
Total net revenue, constant currency growth93.1 %63.9 %64.1 %
30 For additional information about these non-GAAP financial measures, including reconciliations of the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP, see the section titled “Selected Consolidated Financial and Operating Data—Non-GAAP Financial Measures.”
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Factors Affecting Our Performance
Growth, Retention, and Engagement of Active Customers
Our goal is to attract and convert visitors to our apps and websites into Active Customers and encourage repeat purchases. Accordingly, the number of Active Customers and Net Revenues per Active Customer are key measures of growth. We had approximately 14.8 million Active Customers in the quarter ended December 31, 2020, up from approximately 11.8 million in the quarter ended December 31, 2019. During the same periods, Net Revenues per Active Customer also increased to approximately $256 from approximately $161.
That growth reflects our success in attracting, retaining, and increasing the engagement of our customers. In our experience, improvement in customer experience directly correlates with acceleration of customer engagement. We believe the accelerating growth in spend is due to the launch and expansion of our owned-inventory selection, Rocket Delivery, and the introduction of new benefits associated with Rocket WOW membership, Rocket Fresh, and Coupang Eats, among our other offerings.
For example, one of the key long-term drivers of this growth, retention, and engagement of Active Customers is our Rocket WOW membership program, which we launched in 2019. We offer to members of our Rocket WOW membership program unlimited free shipping with no minimum spend, free returns, expedited shipping, and exclusive discounts, among other benefits. This in turn increases members’ engagement with our wide array of offerings and also attracts more customers to the program. A key long-term driver of increasing Net Revenues per Active Customer is the increasing participation of our customers in our Rocket WOW membership program, which comprised 32% of our Active Customers for the quarter ended December 31, 2020. For the quarter ended December 31, 2020, the frequency of purchases by Rocket WOW members31 was over four times that of active non-members.
We have strong spend growth and retention. As customers have used our services more frequently, the spend generated by each customer cohort has grown in each year, demonstrating our value proposition. The chart below reflects the indexed growth in spend by customer cohort, irrespective of cancellations and returns, with each cohort representing customers who placed their first order with us in a given year. For example, the 2018 cohort includes all customers who placed their first order with us between January 1, 2018 and December 31, 2018.
Cohorts consistently increase their spend with us. For example, the 2017 cohort increased its annual spend by approximately 246% in 2020 compared to 2017.
Newer cohorts have increased their spend faster than older cohorts. For example, the 2017 cohort spent approximately 80% more in 2018 compared to 2017. By comparison, the 2018 and 2019 cohorts spent approximately 98% and approximately 119% more, respectively, in their second years compared to their first years with us.
31  Includes purchases by Rocket WOW members who were members throughout the entire period.
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cohort11.jpg
That strong and increasing customer engagement and loyalty is also reflected in a consistently high spend driven by repeat purchases. The chart below reflects the composition of our annual spend from new customers and existing customers, irrespective of cancellations and returns. New customers are those who placed their first order with us in the specified year, while existing customers had placed their first order with us in a prior year. The percentage spend from existing customers has remained strong, increasing from approximately 87% in 2016 to approximately 90% in 2020.
cohort21.jpg
Our ability to attract new customers and increase spend from existing customers depends on our ability to provide a superior experience. To this end, we offer a wide selection of products at competitive prices and an unparalleled delivery experience, convenient online shopping, and comprehensive customer service. We have developed technology that enables us to increase our operating efficiency through enhanced product merchandising and supply chain management, and to provide our customers with personalized product promotions and recommendations. We have benefited from word-of-mouth viral marketing in winning new customers, and we also conduct online and offline marketing and brand promotion activities to attract new customers.
While we are the leading e-commerce business in the market, our total net revenues remains a very small percentage of the total retail, grocery, consumer foodservice, and travel spend in the Korean
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market, which was $470 billion in 2019 and is expected to grow to $534 billion by 2024.32 We believe that Coupang is in the early stages of broad customer adoption by the larger retail market and expect the growth in spend by customer cohort to continue as a result of increased awareness of, and engagement with, our offerings, though the growth may fluctuate year over year.
Increased Selection and Category Mix
Our results of operations are also affected by the breadth and mix of products and services we offer. We offer a wide range of products and services to provide a one-stop shopping experience for our customers. We started our business by primarily selling products from merchants on our marketplace. To enhance the customer experience, we launched our owned-inventory selection in 2013 and Rocket Delivery in 2014, through which we currently offer millions of SKUs. We have increased the number of third-party and owned-inventory SKUs we offer by hundreds of millions in 2020 and 2019.
We expect to continue investing in our owned-inventory selection, including key categories where we currently see lower penetration. These categories include apparel, beauty, consumer electronics, and consumables. While we are focused on increasing our owned-inventory selection in these categories, we also expect to increase the number of merchants offering items in these categories in our marketplace. We expect that our expansion in these categories over time will increase our revenue as well as our gross profit. Our success in increasing selection, including expansion into new categories, has contributed to the increase in total net revenues in 2020, which was up 93.1% on a constant currency basis over 2019. Over that same period, our gross profit increased to $1,986 million in 2020 from $1,033 million in 2019.
As we increase selection, particularly in categories where we have historically had limited assortment, we expect not only to attract more customers, but also to improve loyalty and retention with our existing customers as Coupang becomes their one-stop shop.
Expansion into New Offerings
We have made, and intend to continue to make, strategic investments to offer new and complementary products and technologies. For example, in 2019, we extended our offerings to address online grocery and food delivery through our Rocket Fresh and Coupang Eats offerings, respectively. These and other strategic investments may adversely affect our future financial performance and cash flow generation as they require capital expenditures, marketing, and technology investments. Therefore, we believe that in the near term our investments in new offerings and other strategic investments are likely to have a negative impact on our margins and cash flow generation given their levels of maturity, growth rates, and scale. However, in the long term we believe these investments will be additive to total revenue, gross profits and, most importantly, Free Cash Flow. We expect that we will continue to make strategic investments in new offerings for customers beyond Rocket Fresh and Coupang Eats.
We also expect to invest in empowering merchants. We currently offer merchants solutions including our Fulfillment & Logistics by Coupang program, which enables merchants to become suppliers and offer customers a superior experience through our fulfillment, logistics, delivery, and customer service network, and myStore, which enables merchants to establish and manage their online stores. We also expect that improved advertising tools, insights, and recommendations will help merchants increase their sales with effective targeting, broader reach, and better management of their business and marketing strategies. We expect to continue investing in building out more solutions and tools to help merchants improve customer experience and generate higher sales.
Operating Leverage of our Business Model
Our cost and expense structure has several broad components: cost of sales, which includes the purchase price of products as well as inbound and outbound shipping costs; fulfillment costs, including
32 Calculation based on data from Euromonitor International Limited. “Total commerce” defined to include all online and offline retail—including grocery—consumer foodservice, and travel spend. Retailing 2021, Consumer Foodservice 2020, Travel 2021 value RSP, including sales tax, fixed 2019 exchange rate, constant prices. See the section titled “Market, Industry, and Other Data.”
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the costs incurred in operating and staffing our fulfillment centers and customer service centers; investments in technology innovation and marketing; and employee compensation and welfare costs and expenses.
We believe that absolute gross profit dollars is a more meaningful measure than gross margin given the evolving mix of products and services we offer. Our total gross profit dollars grew significantly in 2020. Several factors are driving this improvement. As we grow sales in higher profit dollar per unit categories such as apparel, beauty, and consumer electronics, we expect our absolute gross profit to expand. As we continue to make investments in orchestration technology to optimize this process, we expect to continue to benefit from leverage against these costs. Finally, economies of scale, including those in logistics and supply chain, will drive higher efficiencies and lower costs. While gross profit may fluctuate from quarter to quarter, we expect it to increase over the long term.
Our cost structure has also been impacted by significant expenses associated with the strategic decision to invest in the growth of our business by incurring expenses in order to attract new customers and launch new offerings, including Rocket Fresh and Coupang Eats. As our total net revenues grow, we expect that overall costs as a percentage of revenue will decrease.
We believe that taking a thoughtful approach to building our customer base and investing in technology today will allow us to maximize revenue in the future. We may also add incremental sources of higher margin revenue in the future, such as additional advertising and merchant solutions. Therefore, we see the opportunity to increase overall operating leverage over time.
Investments in Technology and Infrastructure
We have made and will continue to make significant investments in our technology and infrastructure network to attract new customers and merchants, enhance the customer experience, and expand the capabilities and scope of our network. These investments will be a key driver of our long-term growth and competitiveness, but will negatively impact operating margin in the near-term.
Our results of operations depend on our ability to invest in our infrastructure to cost-effectively meet the demands of our anticipated growth. We operate the largest B2C logistics footprint as compared to other product e-commerce players in Korea.33 As of December 31, 2020, we had over 100 fulfillment and logistics centers in over 30 cities, encompassing over 25 million square feet. We plan to make investments to drive efficiency improvements in our fulfillment and logistics centers, accommodate greater selection, and support new offerings. We expect to continue to expand our last-mile delivery infrastructure, which today is the largest directly employed delivery fleet in Korea. As part of this expansion, to fulfill anticipated future customer demand, we plan to invest $870 million to build seven regional fulfillment centers over the next few years, for which we have not entered into any material commitments as of December 31, 2020. We have entered into construction contracts for other fulfillment center projects underway, each of which is expected to be completed within one year, with remaining commitments for capital expenditures of $208.0 million as of December 31, 2020. We expect that our future expenditures throughout Korea for both infrastructure and workforce-related costs will exceed several billion dollars over the next several years.
We expect spending on technology will increase over time as we add engineers, data scientists, services, and tools, among other investments. Our technology investment and capital spending projects support a variety of product and services that lead to innovations in the customer experience and expansion into new business initiatives. We believe that investment in technology and practical applications of artificial intelligence and machine learning will continue to reduce inefficiencies and change how customers live for the better.
33 Euromonitor International Limited. “Logistics footprint” is defined as the number of logistics centers, including fulfillment centers, logistics centers, and delivery hubs owned by the companies in the report. “Product e-commerce” is defined the same as the goods e-commerce definition in Euromonitor Passport Retailing 2021ed. “Product e-commerce players” as listed in Euromonitor Passport Retailing 2021ed, number of logistics centers, 2020 data. Research conducted on South Korea only. Korea used to mean South Korea, consistent with the Korean language. See the section titled “Market, Industry, and Other Data.”
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Seasonality
Our business is seasonal, reflecting typical consumer purchasing behavior patterns over the course of the calendar year. Typically, we see peak order volumes in the first and fourth quarters, which include major holidays such as Korean Chuseok in late September and October, the Christmas and New Year holiday in December, and Lunar New Year in January and February. Our financials could also be impacted by the timing of these holidays and other events. For example, on years when Korean Chuseok falls in September we could see favorable trends in our volume in the third quarter, and in years when Korean Chuseok falls in October we could see favorable trends in our volume in our fourth quarter. In addition to seasonality in demand, suppliers are also impacted by seasonal weather patterns that could affect certain products, such as fresh produce. As our business grows and we enter new categories or launch new products, other seasonal trends may develop, or these existing seasonal trends may become more extreme.
Impact of COVID-19
The COVID-19 pandemic and resulting global disruptions have affected our business, as well as those of our customers, merchants, and suppliers. To serve our customers while also providing for the safety of our employees, we have adapted numerous aspects of our logistics and infrastructure, transportation, supply chain, purchasing, and third-party merchant processes. We have experienced and may continue to experience a net positive impact on our sales and consumer demand for our products and services following changes in consumer purchasing behavior and the implementation of governmental orders to mitigate the spread of COVID-19, which has resulted in higher levels of customer engagement. However, we have seen and expect to continue to see disruption in our supply chain, which in turn has and may continue to affect delivery times. To offset this disruption, since March 2020, we have increased staffing within our fulfillment and delivery infrastructure and have provided additional compensation to our workers and certain service providers to help fulfill increased order volumes from our customers. However, this increased demand on our business may not continue once the COVID-19 pandemic tapers.
In addition, since the initial outbreak of COVID-19, we have made numerous process updates across our operations and have adapted our fulfillment and delivery infrastructure to implement additional employee and customer safety measures, including enhanced cleaning and physical distancing, personal protective gear, disinfectant spraying, and temperature checks. These measures have been implemented to minimize the risk of spread of COVID-19 to our workers, our customers, and the communities in which we operate, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our workers, customers, merchants, and suppliers. We also made other operational changes in our response to COVID-19 that negatively impacted our logistics and operations cost structure during the year, including costs relating to facility shutdown and remediation efforts and higher temporary labor costs. As a result, during 2020 we incurred $221.3 million in costs that we believe are attributable to impacts from the COVID-19 pandemic.
We expect these effects on our fulfillment and delivery infrastructure, as well as other operational and selling related impacts, to continue into the near future. However, the global impact of COVID-19 continues to rapidly evolve. We do not yet know the full extent of potential impacts of the pandemic on our business or operations or on the global economy, including the impact on our business and operations as a consequence of any future developments related to the duration and scope of the pandemic, any recurrence of the disease, the actions taken in response to the pandemic, the scale and rate of economic recovery from the pandemic, any ongoing effects on consumer demand and spending patterns, or other impacts of the pandemic, and whether these or other currently unanticipated consequences of the pandemic are reasonably likely to materially affect our results of operations, cash flows, or financial condition. For additional details, refer to the section titled “Risk Factors” contained elsewhere in this prospectus.
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Components of Results of Operations
Total Net Revenues
We categorize our revenue as (1) net retail sales and (2) net other revenue. Total net revenues incorporate reductions for estimated returns, promotional discounts, and earned loyalty rewards and exclude amounts collected on behalf of third parties, such as value added taxes. We periodically provide customers with promotional discounts to retail prices, such as percentage discounts and other similar offers, to incentivize increased customer spending and loyalty. These promotional discounts are discretionary and are reflected as reductions to the selling price and revenue recognized on each corresponding transaction. Loyalty rewards are offered as part of revenue transactions to all retail customers, whereby rewards are earned as a percentage of each purchase, for the customer to apply towards the purchase price of a future transaction. We defer a portion of revenue from each originating transaction, based on the estimated standalone selling price of the loyalty reward earned, and then recognize the revenue as the loyalty reward is redeemed in a future transaction, or when they expire. The amount of the deferred revenue related to these loyalty rewards is not material.
Net retail sales represent the majority of our total net revenues which we earn from online product sales of our owned inventory to customers. Net other revenue includes revenue from commissions earned from merchants that sell their products through our apps or websites. We are not the merchant of record in these transactions, nor do we take possession of the related inventory.
Net other revenue also includes consideration from online restaurant ordering and delivery services performed by us, as well as advertising services provided on our apps or websites. We also earn subscription revenue from memberships to our Rocket WOW membership program, which provides customers with access to benefits such as access to Rocket Fresh, no minimum spend for Rocket Delivery, and free shipping on returns, which is also included in net other revenue.
Cost of Sales
Cost of sales primarily consists of the purchase price of products sold directly to customers where we record revenue gross, and includes logistics costs. Inbound shipping and handling costs to receive products from suppliers are included in inventory and recognized in cost of sales as products are sold. Additionally, cost of sales includes outbound shipping and logistics related expenses, and depreciation and amortization expense.
Operating, General and Administrative Expenses
Operating, general and administrative expenses include all our operating costs excluding cost of sales, as described above. More specifically, these expenses include costs incurred in operating and staffing our fulfillment centers (including costs attributed to receiving, inspecting, picking, packaging, and preparing customer orders), customer service related costs, payment processing fees, costs related to the design, execution, and maintenance of our technology infrastructure and online offerings, advertising costs, general corporate function costs, and depreciation and amortization.
Interest Income
Interest income consists primarily of interest earned from our cash and cash equivalents and restricted cash.
Interest Expense
Interest expense primarily consists of interest on our finance lease liabilities, short-term borrowings and long-term debt, and our convertible notes issued in our 2018 convertible note financing (the “Convertible Notes”). Additionally, we expect interest expense to increase in the future in connection with any borrowings under the new revolving credit facility. See “—Other Liquidity Measures—New Revolving Credit Facility.”
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Other Income, Net
Other income, net consists primarily of foreign currency gains and losses, and changes in fair value recorded on the derivative instrument. See Note 9 to our audited consolidated financial statements included elsewhere in this prospectus for a description of changes in fair value recorded on our derivative instrument.
Income Tax Expense (Benefit)
Coupang, LLC (“Parent”) is a “flow-through” entity for tax purposes. As such, U.S. federal and state income taxes on net domestic taxable earnings are the obligation of the parent’s unitholders. Accordingly, no provision for U.S. income taxes are made in the consolidated financial statements. In contrast to the Parent, the Parent’s domestic and foreign subsidiaries are taxable entities. Income taxes incurred by these subsidiaries are recorded in income tax expense (benefit) in the consolidated statements of operations and comprehensive loss.
Results of Operations
The results of operations presented herein include our consolidated results of operations.
Year Ended December 31,
202020192018
(in thousands)
Net retail sales$11,045,096 $5,787,090 $3,799,129 
Net other revenue922,243 486,173 254,460 
Total net revenues11,967,339 6,273,263 4,053,589 
Cost of sales9,981,159 5,240,159 3,864,205 
Operating, general and administrative2,513,912 1,676,941 1,241,790 
Total operating cost and expenses12,495,071 6,917,100 5,105,995 
Operating loss(527,732)(643,837)(1,052,406)
Interest income10,991 19,135 3,925 
Interest expense(107,762)(96,907)(70,949)
Other income, net149,900 22,569 24,177 
Loss before income taxes(474,603)(699,040)(1,095,253)
Income tax expense (benefit)292 (241)2,279 
Net loss$(474,895)$(698,799)$(1,097,532)
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Year Ended December 31,
202020192018
(in thousands)
Net revenues
Net retail sales$11,045,096$5,787,090$3,799,129
Net retail sales growth90.9 %52.3 %70.2 %
Exchange rate effect136,447343,712(102,601)
Net retail sales, constant currency$11,181,543$6,130,802$3,696,528
Net retail sales growth, constant currency93.2 %61.4 %65.6 %
Net other revenue$922,243$486,173$254,460
Net other revenue growth89.7 %91.1 %48.3 %
Exchange rate effect11,39328,875(6,872)
Net other revenue, constant currency$933,636$515,048$247,588
Net other revenue growth, constant currency92.0 %102.4 %44.3 %
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Net Retail Sales
Net retail sales for the year ended December 31, 2020 increased $5,258.0 million, or 90.9% (93.2% on a constant currency basis), as compared to the year ended December 31, 2019. The increase was primarily due to a 18.2% growth in our Active Customers in 2020, as well as 61.5% growth (63.5% on a constant currency basis) in our net retail sales per Active Customer during that same period, driven by a continual increase in product selection and additional offerings provided to our customers. Also impacting the increase in net retail sales was changes in consumer behavior in response to the COVID-19 pandemic.
Net Other Revenue
Net other revenue for the year ended December 31, 2020 increased $436.1 million, or 89.7% (92.0% on a constant currency basis), as compared to the year ended December 31, 2019. The increase was primarily due to the 18.2% growth in our Active Customers in 2020, as well as a 60.5% growth (62.5% on a constant currency basis) in our net other revenue per Active Customer during that same period, driven by an increase in merchants on our marketplace, and related offerings and product selection. Also impacting the increase in net other revenue was changes in consumer behavior in response to the COVID-19 pandemic.
Cost of Sales
Cost of sales for the year ended December 31, 2020 increased $4,741.0 million, or 90.5%, as compared to the year ended December 31, 2019. The increase was attributable to increased product and logistics costs resulting from increased sales. Cost of sales as a percentage of revenue slightly improved from 83.5% in 2019 to 83.4% in 2020, primarily due to efficiencies of scale in our supply chain and direct sourcing from manufacturers, offset by additional COVID-19 related expenses in our logistics network and product costs.
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Operating, General and Administrative Expenses
Operating, general and administrative expenses for the year ended December 31, 2020 increased $837.0 million, or 49.9%, as compared to the year ended December 31, 2019. The increase was primarily due to an increase in fulfillment center capacity, technology infrastructure and general corporate costs to support our overall growth, as well as additional expenses associated with the COVID-19 pandemic and related safety measures. These expenses as a percentage of revenue decreased from 26.7% in 2019 to 21.0% in 2020, due primarily to our ability to continue to generate leverage from the scale of our growing operations, and lower spending on advertising as a result of the COVID-19 pandemic.
Interest Income
Interest income for the year ended December 31, 2020 decreased $8.1 million, or (42.6)%, as compared to the year ended December 31, 2019. The decrease was primarily due to lower amounts of cash invested in interest bearing accounts during 2020.
Interest Expense
Interest expense for the year ended December 31, 2020 increased $10.9 million, or 11.2%, as compared to the year ended December 31, 2019. The increase was primarily attributable to an increase in interest expense on our Convertible Notes due to compounding paid-in-kind interest at higher average rates during 2020.
Other Income, Net
Other income, net for the year ended December 31, 2020 increased $127.3 million, or 564.2%, as compared to the year ended December 31, 2019. The increase was primarily due to a gain of $149.8 million from a change in the value of our derivative instrument for the year ended December 31, 2020 compared with a $(36.8) million loss for the year ended December 31, 2019. Offsetting the increase from the change in derivative values was a $(20.8) million decrease in foreign currency gains and a $35.7 million gain on forward sale contracts that occurred in 2019.
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Net Retail Sales
Net retail sales for the year ended December 31, 2019 increased $1,988.0 million, or 52.3% (61.4% on a constant currency basis), as compared to the year ended December 31, 2018. The increase was primarily due to a 34.3% growth in our Active Customers in 2019, as well as 13.4% growth (20.1% on a constant currency basis) in our net retail sales per Active Customer during that same period, driven by a general increase in product selection, in-stock availability, and offerings provided to our customers.
Net Other Revenue
Net other revenue for the year ended December 31, 2019 increased $231.7 million, or 91.1% (102.4% on a constant currency basis), as compared to the year ended December 31, 2018. The increase was primarily due to the 34.3% growth in our Active Customers in 2019, as well as a 42.2% growth (50.7% on a constant currency basis) in our net other revenue per Active Customer during that
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same period, driven by an increase in merchants on our marketplace and related offerings and product selection.
Cost of Sales
Cost of sales for the year ended December 31, 2019 increased $1,376.0 million, or 35.6%, as compared to the year ended December 31, 2018. The increase was attributable to the increase in net retail sales to existing and new Active Customers. Cost of sales as a percentage of revenue decreased from 95.3% in 2018 to 83.5% in 2019, due primarily to efficiencies of scale in our supply chain and direct sourcing from manufacturers.
Operating, General and Administrative Expenses
Operating, general and administrative expenses for the year ended December 31, 2019 increased $435.2 million, or 35.0%, as compared to the year ended December 31, 2018. The increase was due primarily to additional expenses associated with the increase in fulfillment center capacity, technology infrastructure, advertising expense, and general corporate costs to support our overall growth. These expenses as a percentage of revenue decreased from 30.6% in 2018 to 26.7% in 2019, due primarily to our ability to generate leverage from the scale of our growing operations.
Interest Income
Interest income for the year ended December 31, 2019 increased $15.2 million, or 387.5%, as compared to the year ended December 31, 2018. The increase was primarily due to the significantly higher amounts of cash invested in money market accounts during 2019.
Interest Expense
Interest expense for the year ended December 31, 2019 increased $26.0 million, or 36.6%, as compared to the year ended December 31, 2018. The increase was predominantly due to an increase of 35.6% in the average debt balance in 2019 compared to 2018.
Other Income, Net
Other income, net for the year ended December 31, 2019 decreased $1.6 million, or 6.7%, as compared to the year ended December 31, 2018. The decrease was primarily due to a loss of $(36.8) million from a change in the value of the derivative instrument for the year ended December 31, 2019 compared with a $22.1 million gain for the year ended December 31, 2018. Offsetting the change in derivative values was an approximate $21.1 million increase in foreign currency gains and a $35.7 million increase in gain on forward sale contracts for the year ended December 31, 2019 compared to the year ended December 31, 2018.
Income Tax Expense (Benefit)
Income tax expense (benefit) was $(0.2) million for the year ended December 31, 2019, as compared to $2.3 million for the year ended December 31, 2018. The change was due to changes in a statutory tax obligation from 2019 to 2018 that resulted in an income tax benefit for the year ended December 31, 2019.
Quarterly Results of Operations
The following table presents our unaudited selected consolidated quarterly results of operations for the eight quarters ended December 31, 2020. These unaudited selected consolidated quarterly results of operations have been prepared on the same basis as our audited consolidated financial statements included elsewhere in this prospectus. The operating results for any quarter are not necessarily indicative
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of results for any future period. Our business is affected by seasonality, which historically has resulted in higher sales volume during our fourth quarter. The quarterly results were as follows:
Three Months Ended
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
(in thousands)
Total net revenues$3,803,493 $3,136,507 $2,614,080 $2,413,259 $1,903,663 $1,612,085 $1,409,047 $1,348,468 
Cost of sales3,154,312 2,669,479 2,174,377 1,982,991 1,538,552 1,311,055 1,184,411 1,206,141 
Operating loss(136,146)(217,865)(98,174)(75,547)(74,169)(130,258)(181,151)(258,259)
Net loss$(87,999)$(174,627)$(105,006)$(107,263)$(83,834)$(139,255)$(185,818)$(289,892)
Quarterly Trends
Total Net Revenues
Total net revenues for each of the quarters was higher than the same quarters of the prior year as a result of growth in our Active Customers and net revenue per Active Customer, driven by on-going increases in product selection and additional offerings provided to our customers. Also impacting the increase in our total net revenues in 2020 were changes in consumer behavior in response to the COVID-19 pandemic.
Cost of Sales
Cost of sales increased in each of the quarters of 2020, compared to the same quarters of the prior year, due in part to increased product and logistics costs resulting from increased sales. Cost of sales as a percentage of revenue decreased quarter-over-quarter in 2019, primarily due to efficiencies of scale in our supply chain and direct sourcing from manufacturers. Cost of sales as a percentage of revenue generally increased quarter-over-quarter in 2020, as efficiencies of scale in our supply chain were offset by additional COVID-19 related expenses in our logistics network and product costs.
Operating Loss
Operating loss decreased in each of the first two quarters in 2020 compared to the corresponding quarterly periods in 2019 due to continued efficiencies of scale in our supply chain and direct sourcing from manufacturers, as well as our ability to generate leverage from the scale of our growing operations. Operating loss increased for each of the final two quarters of 2020 compared to the corresponding quarterly periods in 2019 due to increases in fulfillment center capacity, technology infrastructure and general corporate costs to support our overall growth, as well as additional expenses associated with the COVID-19 pandemic and related safety measures.
Non-GAAP Financial Measures
We use EBITDA