Coupang, often referred to as South Korea’s Amazon equivalent, successfully dismissed a lawsuit on Wednesday that alleged the company had defrauded shareholders during and following its 2021 initial public offering (IPO), the most significant IPO by a foreign entity on Wall Street in over six years.
The lawsuit was filed by US District Judge Vernon Broderick in Manhattan on behalf of shareholders spearheaded by a group of New York City public pension funds. The shareholders claimed that Coupang and its executives intended to deceive them, made materially misleading comments, and neglected to address evident discrepancies that rendered their public declarations false.
Allegations against Coupang included concealing hazardous working conditions in its warehouses, manipulating search results, directing employees to write product reviews favoring its private-label brands, and pressuring suppliers to inflate prices on competitor platforms for products it would then automatically price-match.
The shareholders pointed out that the share price of Coupang plummeted by over half within a year of its March 2021 IPO, following revelations that included multiple investigations by South Korea’s Fair Trade Commission and a large warehouse fire.
In a comprehensive 83-page decision, Judge Broderick stated that many of Coupang’s assertions about working conditions were either too vague or “aspirational” to be misleading. Similarly, comments about its supplier relationships were deemed overly unspecific, initially truthful, or amounted to “puffery.”
Broderick further noted that the shareholders failed to establish “with particularity” the circumstances surrounding Coupang’s alleged price manipulation. He also recognized that the company had acknowledged its employees were writing the reviews.
Additionally, the judge dismissed all allegations against the IPO’s underwriters, including Goldman Sachs, JPMorgan Chase, and Allen & Co. The lawsuit was dismissed with prejudice, therefore prohibiting it from being refiled.
The legal representation for the shareholders and New York City Comptroller Brad Lander—who oversees the pension funds—did not provide an immediate response to requests for comment.
“We believed from the start that the claims were baseless, and today’s decision confirms that belief,” a Coupang spokesperson said in a statement.
Coupang, founded in 2010 by billionaire Bom Kim and originally based in Seoul, relocated to Seattle after going public but continues to operate in several countries, including South Korea.
With the financial support of Softbank Group, Coupang secured US$4.6 billion through its IPO, marking the largest IPO by a foreign company on Wall Street since the Chinese e-commerce company Alibaba went public in September 2014.
What were the allegations against Coupang?
Shareholders accused Coupang of concealing hazardous working conditions, manipulating search results, directing employees to write favoring product reviews, and pressuring suppliers to inflate prices on competitor platforms.
What was the outcome of the lawsuit filed against Coupang?
The lawsuit was dismissed with prejudice, indicating that it cannot be brought again. This followed Judge Broderick’s decision that several of Coupang’s statements were too broad, aspirational, or amounted to “puffery” to be considered misleading.
What was the financial impact of Coupang’s IPO?
Backed by Softbank Group, Coupang raised US$4.6 billion in its IPO, making it the largest IPO by a foreign company on Wall Street since Alibaba in 2014.
