The Personal Information Protection Commission (hereafter Personal Information Protection Commission (PIPC)) imposed a record penalty surcharge of 624.7 billion won on Coupang on the 11th, casting clouds again over the share price of parent company Coupang Inc., listed on the New York Stock Exchange. Since Nov. last year, when the large-scale personal information leak first came to light, Coupang's stock has fallen about 40%.
Coupang's stock plunged intraday after the penalty surcharge announcement and then rebounded, but it remains at about half of its 52-week high. Coupang, which posted a loss due to first-quarter compensation coupons and a decline in users, is unlikely to avoid an operating loss in the second quarter as the penalty surcharge is reflected.
On the New York Stock Exchange on the 11th (local time), which closed in the early hours of the 12th Korea time, Coupang's share price finished at $17.25, up 14.25% from the previous trading day. The stock fell to as low as $15.18 intraday but recovered the decline and climbed back into the $17 range. Still, it is only about half compared with the 52-week high of $34.08.
Recently, Coupang's stock has remained about 40% lower compared with around $28 just before the disclosure of the personal information leak at the end of Nov. last year. Earlier, on Nov. 29 last year, Coupang disclosed that the personal information of about 33.7 million customer accounts had been leaked. On Dec. 1, the first trading day after that, the stock plunged more than 5% and then remained weak for a long period.
The latest Personal Information Protection Commission (PIPC) sanction is expected to add another burden to the falling stock price. The Personal Information Protection Commission (PIPC) held a plenary session the previous day and decided to impose a total penalty surcharge of 624.681 billion won on Coupang. The figure includes a 423.6 billion won penalty surcharge related to the information leak and a 201.1 billion won penalty surcharge for the unauthorized collection of users' online activity records. The Personal Information Protection Commission (PIPC) judged that Coupang's personal information management and protection system was inadequate relative to the scale of its business. This penalty surcharge is the largest since the launch of the Personal Information Protection Commission (PIPC).
Coupang is already dealing with performance pressures triggered by the personal information leak. In the first quarter of this year, Coupang posted an operating loss of $242 million (about 354.5 billion won). It swung to a loss, recording the largest quarterly loss in about four years and three months since the fourth quarter of 2021. During the same period, revenue was $8.504 billion (about 12.4597 trillion won), up 8% from a year earlier. While topline growth continued, the growth rate was in single digits for the first time since its listing on the New York Stock Exchange in 2021. The previous lowest quarterly revenue growth rate was 14% in the fourth quarter of last year.
The number of active customers in product commerce, Coupang's core business, was 23.9 million in the first quarter of this year, up 2% from a year earlier, but down 700,000 from 24.6 million in the previous quarter. The product commerce revenue growth rate also slowed to 4%. In its first-quarter earnings release, Coupang said, "The impact of the data incident was reflected in the active customer metric with a time lag."
In particular, compensation coupons paid to customers affected by the information leak pressured both revenue and profit. From Jan. 15 to Apr. 15 this year, Coupang implemented a compensation program that provided purchase vouchers worth about 1.685 trillion won to 33.7 million customers whose personal information was leaked. The compensation coupons were reflected in the results by being deducted from revenue for accounting purposes.
The penalty surcharge in the 600 billion won range is expected to be reflected as an additional burden on second-quarter results. Under accounting principles, a penalty surcharge from a government or regulatory body must be recognized as an expense in the quarter in which the imposition decision is made or disclosed. In this case, Coupang is more likely to post a loss in the second quarter following the first quarter.
Coupang has previously posted a quarterly loss by pre-recognizing a penalty surcharge. In the second quarter of 2024, Coupang reflected an estimated 163 billion won penalty surcharge from the Korea Fair Trade Commission related to manipulating search rankings for PB (private brand) products in its selling, general and administrative expenses, and recorded an operating loss for the first time in eight quarters.
This Personal Information Protection Commission (PIPC) penalty surcharge is nearly four times larger than that. It is also similar to Coupang Inc.'s annual operating profit of $473 million (about 679 billion won) last year. If the amount is reflected in second-quarter earnings, some expect the loss to widen from the first quarter.
Meanwhile, external app usage indicators show a slight recovery in Coupang's user numbers. According to WiseApp Retail, Coupang's monthly active users (MAU) in May were 33,687,349, up 0.9% from the previous month. After falling 0.2% month over month in April, it returned to growth in a month.
However, WiseApp's MAU is a panel-based estimate of people who used the Coupang app during a month, which differs from the number of active customers in product commerce that Coupang compiles and announces each quarter. The number of active customers in product commerce is the tally of customers who actually placed orders through Coupang's product commerce service during the quarter. While the two indicators are hard to compare directly, app users serve as a supplementary indicator to gauge actual purchasing customers or the sales trend because they show consumer touchpoints and traffic changes.
Coupang has signaled legal action against the Personal Information Protection Commission (PIPC) decision. It is reportedly preparing a response, including retaining a major law firm. In a current report filed with the U.S. Securities and Exchange Commission (SEC) on the 11th (local time), Coupang Inc. said, "The regulatory findings and sanctions of Korea's Personal Information Protection Commission (PIPC) are subject to judicial review, and we plan to seek legal relief through the Seoul Administrative Court."
A Coupang official said, "This penalty surcharge will be reflected in second-quarter accounting," and added, "If the size of the penalty surcharge is adjusted through future legal procedures, the accounting treatment may also be adjusted accordingly."