Selling Coupang: Regulatory Risk Outweighs Potential Returns
We recommend selling shares of Coupang (NYSE: CPNG), which we added to Complete Investor in April 2024.
In November, Coupang – South Korea’s dominant e-commerce platform – disclosed the largest data breach in the country’s history. The personal information of 33.7 million customers, roughly two-thirds of South Korea’s population, was exposed. Customers canceled memberships, executives were summoned before the National Assembly, and Coupang’s Chief Executive of the Korea operations resigned. Shares, which traded above $33 before the breach, have been cut in half.
To its credit, Coupang has largely restored consumers’ faith. Customers are back to pre-breach levels, underlying customer spending is up approximately 16%, and revenue grew 10% in constant currency last quarter. However, the Korean government continues its investigation – and scrutiny has broadened beyond the breach itself.
In June, the regulators imposed a record 624.7 billion won ($412 million) privacy fine against Coupang – and roughly a third of it covered separate violations involving behavioral data collected from outside websites and apps. Also in June, the National Tax Service issued notices seeking roughly $208 million in additional taxes, penalties, and interest following a special audit of transactions among Coupang’s Korean subsidiaries. A Fair Trade Commission case targeting Wow membership bundling – open since 2024 – now heads toward a scheduled September hearing, with Korean press floating penalty estimates in the hundreds of billions of won. Coupang is contesting the fine and disputing the tax notices, which doesn’t shrink the risk so much as extend it: years of litigation against your own government is an uphill battle.
There’s a real risk this regulatory battle has no end in sight. The decisive variable in this position is now Korean domestic politics – a dispute that has already drawn formal oversight from the U.S. House Judiciary Committee, whose July report sharply criticized South Korea’s treatment of Coupang, and has become a point of friction in broader U.S.-Korea trade relations. A regulatory campaign with political momentum in a market that supplies more than 90% of revenue is too much for comfort.
We’re closing the position at approximately $16 per share, a 13% loss from our $18.32 entry more than two years ago. If Seoul’s campaign genuinely concludes, we’d look at this exceptional business again. Until then, we view the risk as too great relative to the potential reward.
Action to Take: Sell Coupang (NYSE: CPNG)
Selling Celsius After Core Brands Disappoint
We also recommend selling shares of Celsius Holdings (Nasdaq: CELH), which we added to Complete Investor in March 2024.
The energy-drink maker delivered disappointing Q2 results on August 6, with revenue of $818 million coming in $52 million below the consensus analyst forecasts. Meanwhile, earnings per share (“EPS”) of $0.36 also disappointed relative to the $0.42 consensus estimate for the quarter.
The big concern came from unexpected weakness in sales of the company’s flagship Celsius brand, where revenue declined 12% year-on-year (“YOY”), as well as a 13% drop in Rockstar sales. On the positive side, these declines were offset by a 21% YOY increase in Alani Nu sales, leading to overall revenue growth of 10.6% versus the prior year.
The declines in Celsius and Rockstar jarred investors, sending shares plunging 20% yesterday. The stock has since rebounded starting on August 7, after news broke that the founder of Rockstar Energy Russ Savage has built a stake of more than 12 million CELH shares. Savage now controls roughly 4.7% of the company’s stock, worth about $300 million.
In an August 7 CNBC appearance, Savage called for the ouster of the Celsius “CEO, the COO, the brand manager, and the marketing manager,” while publicly volunteering to take the CEO role himself. His core complaint is that Celsius has too many management layers and insufficient accountability.
With the potential for an activist turnaround providing a near-term boost in the share price, we believe this provides an opportune time to exit Celsius. The decline in sales of two of the core brands is a thesis-killer in our view.
We believe there are better places to put capital than waiting on a turnaround to take hold.
Action to Take: Sell Celsius Holdings (Nasdaq: CELH)
Porter & Co.
Stevenson, Maryland
The post Sell Alerts: Coupang (CPNG) And Celsius Holdings (CELH) appeared first on Porter & Co..
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