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(Bloomberg) -- South Korean e-commerce giant Coupang Inc.’s initial public offering is on track to be the largest listing by a Korean company in a decade. And, like most of the major tech offerings these days, it’s happening in New York.There are three big reasons that explain why the U.S. is a better pick for the e-tailer backed by SoftBank Group Corp.’s Masayoshi Son. Perhaps most significantly, New York offers a considerable valuation premium. It also has a deeper, more liquid market, and allows uneven voting rights that would benefit Coupang’s founder, Harvard Business School drop-out Bom Kim.The U.S. has been the destination of choice for mega tech IPOs, with 2020’s biggest debuts Airbnb Inc. and DoorDash Inc. both listed in New York. Chinese e-commerce giants such as Alibaba Group Holding Ltd. and JD.com Inc. also went public there. Coupang is seeking to raise up to $3.6 billion in its IPO and could garner a value of more than $50 billion. That would make it the largest float by a Korean company since Samsung Group took its insurance unit public at home in 2010.Had the loss-making e-commerce firm listed in Korea -- which from this month will allow unprofitable companies to go public -- Coupang could have fetched a maximum valuation of just $10 billion, according to Suh YongGu, a marketing professor at Sookmyung University.“The history of capitalism in South Korea is short, so Koreans don’t ascribe high valuations to loss-making companies,” said Suh.South Korea’s stock market is less than 70 years old, and is dominated by chaebols, or family-controlled industrial groups. In fact, SK Bioscience Co., a unit of SK Group, one of the county’s largest chaebols, will be the latest to have a stock market presence when it goes public this month. The maker of AstraZeneca Plc’s Covid-19 vaccine for Korea, is seeking to raise $1.3 billion ahead of its March 18 listing, according to Korean-language Seoul Economic Daily Monday.Korean investors’ appetite for their homegrown entrepreneur-led startups, however, will be tested in coming months with IPOs by Krafton Inc., the creator of hit game PUBG, and the country’s biggest mobile-only bank Kakao Bank. Unlike Coupang, those firms are profitable.Coupang has lost money in the last three years, recording an accumulated deficit of $4.12 billion as of December, according to its filing. Thanks to the surge in online shopping during the pandemic, however, it managed to nearly double its revenue to $12 billion last year.A $51 billion valuation would put Coupang among the five most valuable companies in Korea, of which Samsung Electronics Co. is the biggest. Korea’s other big startups with growing clout in e-commerce -- the $58 billion Internet conglomerate Naver Corp., and the $39 billion messaging app Kakao Corp. -- are both listed in Seoul, but were both profitable when they went public. The two are backed by entrepreneurs and not linked to the chaebols like Samsung Group.In fact, Coupang’s listing in the U.S. will allow it to exceed the combined market value of the six chaebol-owned retailers trying to expand their presence in e-commerce -- E-Mart Inc., Lotte Shopping Co., GS Retail Co., Shinsegae Inc., BGF Retail Co., and Hyundai Department Store Co..Liquidity is another allure of the U.S. market, allowing companies to raise funds frequently through secondary share sales. Korea’s stock market, at a total value of $2.12 trillion, is a fraction of the $44.2 trillion of the U.S., according to Bloomberg data.“It’s easier for investors to exit” their stakes in the U.S., said Seo Sang-Young, an analyst at Kiwoom Securities in Seoul. “And the trading volume is much larger.”And finally, a U.S. listing gives founders more power.Korea doesn’t allow uneven voting rights, favored by tech firms like Alphabet Inc. and Facebook Inc., who see it as a way for founders to focus on the long-term. But the U.S. does, even if the ownership structure is itself not without controversy, as it lacks shareholder protections. Kim, Coupang’s 42-year-old founder, will end up with 76.7% of the company’s voting rights with just 10.2% of its outstanding shares.“We would have liked Coupang to list in Korea,” said Kim Sung-gon, a spokesperson at Korea Stock Exchange. “But we respect the company’s choice.”Korea IPO Boom Year Kicks Off With Coupang FloatStill, missing out on the chance to buy into one of the country’s hottest companies in the biggest Asian company IPO since Alibaba Group Holding Ltd.’s $25 billion New York listing in 2014 is rankling the retail investors who have come to dominate Korea’s stock market since the pandemic spread.“There is certainly regret among retail investors that they cannot buy into the IPO,” said Kim DongJoo, the CEO of Iruda Discretionary Investment, a Seoul-based investment firm catering to retail investors seeking to buy foreign stocks.Largest IPOs by Korean Companies:Coupang prides itself on its same-day or at least pre-dawn deliveries. It is also giving its warehouse staff and 15,000 full-time delivery workers a total of $90 million in pre-IPO stock, a unique largess that comes at a time when the deaths of a string of couriers from overwork as online orders soared is causing a national uproar.“We believe we are the first company in Korea to make our front-line employees stockholders,” Kim said in a letter to shareholders in Coupang’s IPO filing.Five Coupang warehouse workers have died in the past year, according to the Korean Confederation of Trade Unions, a major labor organization. On Saturday, a Coupang delivery driver was found dead in an incident which Yonhap News said showed symptoms his colleagues attributed to overwork.Coupang said in a statement on Monday that the deceased worker had “worked around four days a week on average and worked about 40 hours for the past 12 weeks.” It added, however, that it would “make efforts to thoroughly protect the health and safety of workers.”(Updates with Coupang’s statement on a worker’s recent death in the last two paragraphs)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- China pledged to boost spending and drive research into cutting-edge chips and artificial intelligence in its latest five-year targets, laying out a technological blueprint to vie for global influence with the U.S.Chinese Premier Li Keqiang singled out key areas in which to achieve “major breakthroughs in core technologies,” including high-end semiconductors, operating systems, computer processors and cloud computing -- areas in which American firms now hold sway. Beijing will also aim to get 56% of the country on faster fifth-generation or 5G networks. Nationwide R&D spending will increase by more than 7% annually, which “is expected to account for a higher percentage of GDP” than during the previous five years, he added.China is moving quickly to cut its dependence on the West for crucial components like computer chips, an issue that became more urgent after a global shortage of semiconductors worsened during the pandemic. Beijing is also making big bets on emerging technologies from hydrogen vehicles to biotech while looking to ensure its own chipmakers can compete with the likes of Intel Corp. and Taiwan Semiconductor Manufacturing Co. That encompasses a new emphasis on silicon design software and so-called third-generation chipmaking -- two areas critical to Beijing’s drive to achieve technology self-sufficiency.“Innovation remains at the heart of China’s modernization drive,” Li said in an address to the National People’s Congress in Beijing on Friday. “We will strengthen our science and technology to provide strategic support for China’s development.”Li’s speech punctuated goals enumerated in China’s 14th five-year plan, also released Friday, which prioritized advances in younger spheres such as quantum computing, neural networks and DNA banks. The document enshrines a multi-layered strategy both pragmatic and ambitious in scope, embracing aspirations to replace pivotal U.S. suppliers and fend off Washington, while molding homegrown champions in emergent fields.Chipmakers including Shenzhen Goodix Technology Co. and China Resources Microelectronics Ltd. rose more than 3% on mainland bourses in the afternoon. But Hong Kong-listed Semiconductor Manufacturing International Corp., China’s largest chipmaker, slipped in tandem with a broader global tech-shares selloff.Read more: China Sets Conservative Economic Growth Target of Above 6%At stake is nothing less than the future of the world’s No. 2 economy. Beijing is moving swiftly while the Biden administration escalates a battle against what it called “techno-autocracies.” That could extend or even expand blacklistings that banned key transactions with corporations from Huawei Technologies Co. to ByteDance Ltd. and Tencent Holdings Ltd.To a country that imports $300 billion of chips annually, a worsening global shortage drives home the risk of relying on potentially hostile suppliers for the building blocks of everything from AI to next-generation networks and autonomous vehicles. Friday’s report formalized China’s ambitions to develop its own software for semiconductor design -- supplanting tools from American firms Cadence Design Systems Inc. and Synopsys Inc.It also pledged to develop its own advanced chip manufacturing technologies and key materials that comprise third-generation chips. The country aims to secure first-mover advantage in that nascent arena, involving compounds such as silicon carbide and gallium nitride and chips can operate at high frequency and in higher power and temperature environments, with broad applications in fifth-generation radio frequency chips, military-grade radar and electric vehicles.While specifics of that endeavor won’t emerge for months, Friday’s documents provided important clues about the envisioned roadmap. That includes building more national laboratories and innovation centers, as well as ramping up efforts to implement a little-heard of program called the Sci-Tech Innovation 2030 Agenda. Beijing also revealed plans to try and entice more talent from abroad via a “technology immigration system,” likely targeting semiconductor hotbeds from Silicon Valley to Taiwan.Read more: China Deals Fresh Blow to Tech Giants in Reach for DataOpen sharing of data will be key, according to the report. Beijing is establishing a platform for sharing public and government data, while simultaneously crafting policies to ensure the security of that information. In a related move, the five-year plan called on technology giants such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd. to share key data, dealing a further blow to companies already reeling from heightened antitrust scrutiny.“Basic research is the wellspring of scientific and technological innovation,” Li said. “So we will ensure the stable functioning of funding mechanism for basic research and boost spending in this area by a considerable sum.”(Updates with share action from the sixth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- China called on its technology giants to share key data, dealing a further blow to the companies already reeling from heightened antitrust scrutiny.Companies are encouraged to open up data related to areas from search to e-commerce and social media, in order to promote the healthy development of the sharing and online economies, according to a government report outlining the Communist Party’s top priorities for the next five years. Beijing is also establishing a platform for sharing public and government data.While Xi Jinping’s government has long identified data as a key resource, it’s the first time that the opening up of data amassed by private-sector companies has been included in the country’s top economic guidelines. Beijing in November launched a sweeping crackdown on alleged monopolistic practices in its giant internet industry, worried about the growing influence of its largest private corporations thanks to the vast swathes of information they’ve hoovered up.Industry behemoths Alibaba Group Holding Ltd. and Tencent Holdings Ltd. as well as up-and-coming competitors like ByteDance Ltd. and Meituan have at their disposal vast amounts of proprietary information, gathered from the hundreds of millions of consumers shopping on their platforms and using social-media apps like WeChat and Douyin. Surrendering that data could undermine their market-leading positions and deal a heavy blow to their ability to squeeze out smaller competitors.Antitrust regulators in November unveiled new rules to stamp out monopolistic practices in its tech industry, cracking down on practices such as forced exclusive arrangements with merchants known as “Pick One of Two” to algorithm-based prices favoring new users. Beijing also intends to better regulate the collection and use of consumer data, according to a plan by the general offices of the powerful Communist Party Central Committee and the State Council, the cabinet.The 14th Five Year Plan released on Friday didn’t provide specific details on how companies should share their data.“China’s thinking on data policy has made a game-changing evolutionary leap,” Kendra Schaefer, head of digital research at Trivium China in Beijing, said before the National People’s Congress. “Increasingly, in the eyes of Chinese policymakers, creating the legal and technical infrastructure to support the marketization of data is not a nice-to-have, but an immediate economic imperative.”Data ownership and security has long been a flash point between China and rival nations, especially the U.S. Under the Trump administration, Washington had sought to ban services by ByteDance and Tencent, arguing that the companies could allow Beijing to gather data from tens of millions of American users. Corporations are already required to provide access to their technology and assist with investigations involving crime and national security, under a 2017 Cybersecurity Law.Beijing’s stance is echoed by at least one of its tech moguls. “To grab users, every app is spending huge resources in building up content that can only be viewed within the app,” Baidu Inc.’s Robin Li said in a proposal to China’s top lawmaker. The effectiveness of his company’s leading search engine relies on open online information. “They become ‘information islands’ separated from each other.” He suggested the government set up a pilot program to break up such barriers among internet services vital to daily lives.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.