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Coupang’s New York listing clouded by worker deaths

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Bom Kim, the founder of Coupang, South Korea’s answer to Amazon, is expecting his company to soar past a $50bn valuation when it lists in New York this week.

But back in Seoul, far away from the glitz of the initial public offering, the ecommerce company, which is backed by the likes of SoftBank, Sequoia and BlackRock, is facing political pressure and police inquiries over a series of injuries and deaths among its workers.

According to Korean politicians and the country’s Public Service and Transport Workers’ union, eight Coupang employees have died over the past year as a result of overwork.

This included two Coupang employees who died over the weekend, the union told the Financial Times.

In response to the death on Saturday of a delivery driver, the company said: “The deceased worked around four days a week on average and worked about 40 hours for the past 12 weeks”, adding that his last day of work was on February 24.

“The company will actively co-operate in the processes of determining the cause of death, and will spare no efforts in providing all supports to relieve the pain of the bereaved families,” the company added. “Coupang will further endeavour to protect the health and safety of the workers even more thoroughly.” 

Coupang declined to comment on the broader allegations.

The company has declined repeated requests from the FT for interviews over the past two years.

Analysts said that while the issues were unlikely to dampen investor enthusiasm for this week’s IPO, they raised questions about the sustainability of Coupang’s long-term growth.

“Although there are certainly problems with the workload, and labour intensity in the industry, investors are not paying much attention to labour issues yet,” said Yoo Seung-woo, an analyst at SK Securities.

Employees wearing protective masks pack fruit at a Coupang Corp. fulfillment center in Bucheon, South Korea
Employees pack fruit at a Coupang fulfilment centre in Bucheon, South Korea © Bloomberg

In its IPO prospectus, Coupang warned that some of its operations were “subject to certain detailed and complex fair trade, labour, 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”.

Coupang touts its technology

Kim, a 42-year-old Harvard dropout, started Coupang as a site offering deals to group buyers. With aggressive marketing and cheap deals, it became hugely popular and was the top app in Google’s Korea Play store last year.

In recent years, Kim has spent heavily on building a logistics network of 100 fulfilment centres across 30 cities. Coupang now boasts that nearly 100 per cent of its orders are delivered either the same or the next day.

The company says this network is how it outcompetes its fierce rivals, such as Gmarket and Auction, owned by Ebay, and traditional Korean retail giants including Lotte and Shinsegae.

Korean labour activists have drawn some parallels between Coupang and Amazon, but say that Coupang’s operations are much less automated than those of the Seattle ecommerce group, and much more reliant on manual workers. They added that Coupang’s biggest innovation was using data and artificial intelligence to find ways to squeeze those workers.

Go Geon, a former worker at the company’s warehouse in Bucheon, south-east of Seoul, tore his left hamstring while hurrying with a box in one of the company’s warehouses, and was asked by his manager not to lodge a complaint. “Hamstring injuries typically happen to professional athletes,” he said, but added that such injuries “have become like part of the job”.

According to warehouse employees, if they fall behind hourly targets they face public shaming — and the targets are continually rising. In particular, workers said there was a huge drive for faster work when Coupang introduced same-day fresh-food delivery in April 2020.

“The company’s obsession with efficiency is hurting workers’ health. Its innovations are the results of driving the workers to the extreme,” said Ryu Ho-Jung, a lawmaker for the progressive Justice Party. “If this situation continues, we will see more workers die.”

South Korea’s Labour ministry carried out a three-month investigation into Coupang’s logistics network last September and said it had found workers needed more breaks and more safety education. It called for medical check-ups for night-time staff.

“We are watching the company’s labour environment with concern,” said a ministry official, adding that the ministry had met Coupang’s executives last month and asked them to remedy the problems.

Companies exploit loopholes

South Korea has strong labour laws for full-time workers, including a maximum 52-hour work week, compulsory one-hour breaks during an eight-hour shift, and mandatory medical insurance for work-related injuries.

But the laws do not apply to temporary workers without contracts, and unions say there are many loopholes. Korean courts have tended to side with companies over workers, although workers at Samsung who contracted cancer while making chips have recently won a landmark case.

A Coupang employee unloads an eco-bag carrying fresh food from a delivery truck in Bucheon, South Korea,
A Coupang employee unloads an eco-bag carrying fresh food from a delivery truck in Bucheon, South Korea, © Bloomberg

Seventeen couriers at other Korean delivery companies, who often work up to 90 hours a week on commission, have died of overwork in South Korea since the beginning of last year, according to the delivery workers union. Coupang’s delivery drivers are full-time employees, and the company said it abided by the 52-hour limit.

But at its warehouses, 90 per cent of workers are day labourers or on short-term contracts, a higher share than at its rivals, according to labour researcher Jang Kwi-yeon.

“One of the biggest complaints we hear consistently from warehouse workers is that their workload at Coupang is much heavier than its ecommerce rivals,” she said.

Coupang said it increased its warehouse workforce by 78 per cent and invested more than Won500bn last year in automating its facilities in order to reduce workload. Nevertheless, the rate of injuries among its workers has grown as fast as its sales, near-tripling to 982 between 2018 and last year, according to the state-run Korea Workers’ Compensation & Welfare Service. 

National outcry

In October, Jang Dug-joon, a 27-year-old worker at Coupang’s fulfilment centre in Daegu, was found dead in the bathtub in his home shortly after finishing his night shift.

A Coupang fulfillment center building in Bucheon, South Korea.
A Coupang fulfilment centre in Bucheon, South Korea. © Bloomberg

The case sparked national outcry over worker treatment in the ecommerce sector, which boomed during the coronavirus pandemic. According to a government investigation, Jang had worked for more than 62 hours during the week before his death.

Coupang initially denied Jang died because of his work but later apologised for his death after an official verdict that he died of overwork. Coupang promised to provide support for his bereaved family, but it declined to comment on whether any compensation had been made.

In January, Choi Kyung-ae died of a heart attack on her sixth day working at Coupang, after a nine-hour shift in an unheated warehouse, according to the union and her family.

“It was -14C that night. And she had to work in the cold warehouse, relying on just a hand warmer,” says Kim Chul-soo, Choi’s brother-in-law. “But the company is denying any responsibility and refusing to meet to discuss the issue.” Coupang declined to comment on the case.

Last month Joe Nortman, the head of Coupang’s logistics operations, was summoned to a parliamentary hearing on labour conditions. He apologised for the death of Jang and other workers and vowed to improve the company’s labour environment.

“I deeply regret all these situations. I think it is a tragedy whenever there is any fatality, whether it’s work-related or not. And I feel we’re going to continue to do our best to improve . . . I think the results need to get better. And we are committed to making that happen,” said Nortman, who worked for companies like JCPenny, Amazon and UPS before joining Coupang.

Kim, Coupang’s founder, boasts of being the number one job creator in the private sector, adding 25,000 new jobs last year. But unions and labour activists say Coupang’s day workers or temporary workers suffer from a lack of job security and therefore are unable to voice their opinion collectively against the company’s labour practices and working conditions. 

According to the union of Coupang drivers, average individual delivery loads increased to 340 a day by February 2020 from just 57 packages in 2015 but union members say their wages have stagnated. And more than 90 per cent of Coupang drivers quit within a year because of excessive physical work, the union said. Coupang declined to comment on the union’s claim.

A delivery driver working in Seoul’s northern outskirts, who asked not to be named, said he had no time to eat during night shifts that involve delivering packages to about 150 locations.

“It is not surprising at all if your colleague doesn’t show up the next day. You just assume he quit, because the workload is so unbearable. I am not sure how long I can withstand this,” he added.

Coupang has promised $90m of stock options to its frontline workers and non-manager employees, according to the IPO prospectus. But some workers said they were unlikely to be able to remain for the two years needed to fully exercise the right.

“I am afraid that I may die if I work like this every day,” said a 53-year-old worker with the surname Kim at Coupang’s Deokpyeong warehouse.



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Oatly’s US IPO prospectus highlights risks to its Chinese backer

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Oatly, the Blackstone-backed vegan milk company which on Monday filed to float on Nasdaq, said it would consider adding a listing in Hong Kong within the next two years, citing its relationship with a Chinese state-owned conglomerate.

China Resources owns more than 60 per cent of the Swedish group through a joint venture with the Belgian family investment group Verlinvest and has helped the company to dramatically expand its presence in China in recent years.

In a prospectus for its Nasdaq share offering, Oatly said it could seek a second listing in Hong Kong if its status as a US public company had a “material adverse effect” on its leading shareholders.

Explaining why it had agreed the provision, Oatly cited the possibility that the US government could make it hard for the group to share information with a state-owned company and might prevent China Resources from placing its representatives on the Oatly board, or even force it to divest.

The company also said it could pursue a Hong Kong listing if it generated more than 25 per cent of its revenue from sales in the Asia-Pacific region for two consecutive fiscal quarters.

The prospectus detailed how Oatly has been able to rapidly expand its presence outside Europe, with Asia and the Americas contributing a combined $150m, or 36 per cent of total revenues, last year compared to $50m, or 24 per cent, in 2019.

Oatly’s products are now sold at more than 9,500 shops in China, three years after launching in the country. In the US, Oatly products can be found at 7,500 retailers and in more than 10,000 coffee shops.

The relationship with China Resources attracted controversy when the group invested in Oatly with Verlinvest in 2016, prompting Swedish media to highlight China’s environmental and human rights record.

“It’s difficult to have a large float without Chinese investors being involved these days,” said one small Oatly shareholder from a venture capital firm.

Malmo-based Oatly has grown on the back of the popularity of plant-based milk alternatives across the globe and is pushing for a $10bn valuation from the Nasdaq float, according to people familiar with its plans.

An investment round last year led by Blackstone valued the oat milk maker at $2bn. Oatly’s other investors include television host Oprah Winfrey and rapper Jay-Z’s Roc Nation.

The prospectus confirmed earlier revenue estimates of more than $400m in 2020 — $421m to be precise, up from $204m in 2019 — though losses widened from $35.6m to $60.4m.

International expansion has focused on the specialty coffee market, with its “barista” milk which froths like cow’s milk. Oatly has also expanded into making and selling plant-based ice cream and yoghurt, although its oat milk made up 90 per cent of revenue last year.

The company said it was planning to raise $100m in its initial public offering, a place holder number that is likely to change. Morgan Stanley, JPMorgan and Credit Suisse are leading the offering.



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Grab co-founder set to dramatically increase voting rights with Nasdaq listing

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Malaysian internet entrepreneur Anthony Tan is set to dramatically increase his control over his company Grab when the south-east Asian tech group joins Nasdaq later this year.

In a move that would be the envy of his Silicon Valley peers, the Grab chief executive and co-founder will have 60.4 per cent of the voting power in the company while owning a stake of just 2.2 per cent.

This is a feat comparable to that of Facebook’s Mark Zuckerberg and unprecedented for a deal involving a special purpose acquisition company.

The holdings were contained in papers filed last week after the Singapore-based company unveiled a record deal to combine with a New York-listed Spac launched by Altimeter, a Silicon Valley group, valuing the business at almost $40bn.

The filing also revealed that the company, whose superapp offers everything from ride-hailing to deliveries and financial services, has reported potential violations of anti-corruption laws to the US Department of Justice.

Proponents say Tan needs the control to make quick and difficult decisions in navigating Grab’s eight markets. The deal is a crucial test of international investor appetite for a tech company with operations sprawled across the vastly diverse and emerging region of south-east Asia.

Bar chart of % of voting power showing  Anthony Tan will have majority voting control at Grab

But his grip on the SoftBank-backed company’s direction marks the first time a Spac deal has entrenched a founder’s voting rights to this degree, say experts.

Such an overriding majority voting right for a chief executive is “unprecedented” for a company seeking a Spac route, said Robson Lee, a partner at law firm Gibson Dunn. “While it is not unusual for high tech companies seeking a listing to entrench management shares with additional voting rights, a 60 per cent absolute majority will be the first in the market,” Lee said.

Others put it more bluntly.

“By bypassing a traditional IPO, Grab has attracted less scrutiny over Anthony’s control,” said one investment banker with direct knowledge of the deal.

While common in the tech space, such arrangements are not always popular, as evidenced by the backlash against Adam Neumann, WeWork’s messianic co-founder, and shareholder protests faced by Zuckerberg, who holds about 60 per cent of the voting power at Facebook.

Details of Tan’s control did not surprise Grab’s rival, Indonesia-based super app Gojek. Merger talks between the two companies were abandoned late last year before Grab began considering a Spac merger, and people close to the talks said Tan had demanded control indefinitely as a “CEO for life”. Grab has denied the reports.

One long-term Grab investor said that Tan, who comes from one of Malaysia’s wealthiest families, “needs a high level of power” to negotiate a seat at the table at the region’s messily interlinked world of family-run conglomerates, politics and regulation.

“The issue is south-east Asia in itself is not a homogeneous market . . . It’s a collection of different markets with their own sets of regulatory considerations,” said Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore.

In its filing, Grab outlined several risks including an investigation it launched into potential violations of anti-corruption laws related to its operations in one country. The company reported the potential violations to the DoJ but declined to comment on them when contacted by the Financial Times.

The onus is on Grab and Tan to justify the dichotomy between ownership and voting shares and prove it is in the interest of the shareholders, said Nirgunan Tiruchelvam, head of consumer sector equity research at Tellimer Group.

“If he can argue that such a disproportionate share of voting would be beneficial to shareholders and add value for further direction of the company, then it’s possible shareholders would be comfortable with it.”

But even key shareholders have had their voting power diluted via the dual-class share structure — similar to Facebook. SoftBank, Grab’s biggest shareholder, has an 18.6 per cent stake that will translate to just 7.6 per cent voting power. Uber’s 14.3 per cent stake has a 5.8 per cent voting power and Didi Chuxing’s 7.5 per cent stake, just 3.1 per cent.

“For now we are just happy with the liquidity, but longer-term we want to see genuine progress towards profitability,” said one investor.

That is still years away. Grab has lost money every year since its inception in 2012 as it has grappled with other well-financed competitors. Accumulated losses hit $10bn at the end of 2020. Last year it reported a net loss of $2.7bn against net revenues of $1.6bn and it does not expect to break even until 2023.

Column chart of Net losses ($bn) showing Grab as a whole is still not profitable

On top of that, Grab has not said if it will appoint any independent board directors, nor does its filing say what checks and balances are placed on Tan. Information on succession or who inherits Tan’s stock has not been released.

“Further details will be in the F-4 registration statement that will be filed with the SEC [the US Securities and Exchange Commission], and to comply with this regulatory process, we will not be able to share more until the F-4 is finalised,” Grab said in a statement.

Jeffrey Seah, a partner at Singapore-based venture capital firm Quest Ventures, said: “While he has supervoting rights, he has kept his management team intact. That is a [type of] check and balance.”

But even the supervoting shares held by Grab’s co-founder Tan Hooi Ling and president Ming Maa will be beneficially owned by Tan under a deed that will be entered at the time of the merger.

So far, Grab’s big-name investors seem happy to back Tan. Funds investing in the deal include BlackRock, T Rowe Price, Fidelity, Janus Henderson, Abu Dhabi’s Mubadala, Singapore’s Temasek, Malaysian fund Permodalan Nasional Berhad as well as a number of wealthy Indonesian family offices.

The test will come when Grab joins the Nasdaq, said Loh. The deal has been approved by both Grab and Altimeter Growth boards, and it could close by July.

“The moment of truth will be when we discover the listing price and when it’s actually traded . . . If there are concerns, all investors will probably give it a discount,” he added.

mercedes.ruehl@ft.com and stefania.palma@ft.com



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VCs/start-ups: IPO mania raises funding and valuations

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Against the odds, 2020 was an extraordinarily good year for tech start-ups and venture capitalists. This year is going to be even better. 

A boom in initial public offerings has handed some of the biggest names in venture capital lucrative exits. Add in low interest rates, stock markets at record highs, optimism surrounding economic recovery and the rapid digital transformation of multiple sectors and money is flowing freely. The first quarter of 2021 set a new record for global venture funding, with $125bn raised around the world, according to data from Crunchbase. Early-stage funding rose by almost half compared with the previous quarter, to more than $35bn.

Doom-laden warnings of down rounds and a freeze on funding last year have been squashed. Sequoia Capital last spring told companies in its portfolio that private financings could soften “significantly”, calling coronavirus the black swan of 2020. Yet funding and listing postponements were shortlived. Even start-ups without sales, aka “pre-revenue” companies such as aerospace start-up Archer Aviation, are in demand thanks to the rise in special purpose acquisition companies (Spacs) searching for targets.

Charts showing deal value of first-quarater IPOs, including Spacs in the US; global venture capital early-stage investment; and top 10 private companies valued at more than $1bn

In the first quarter of 2021, 398 US companies joined markets via initial public offerings, up from just 37 last year. Three-quarters were Spacs. Even excluding the Spac frenzy, the first quarter eclipsed the past five years. This does not include direct listings of Roblox and Coinbase either.

Listing mania has allowed VC firms such as Sequoia and Andreessen Horowitz to cash out on long-term bets and gather more funding firepower. This has already had an impact on valuations. Last year, 121 companies joined the elite group of start-ups valued at $1bn or more, according to CB Insights data. In the first three months of 2021, 78 companies hit the same target. Around the world there are now more than 600 such unicorns, led by China’s ByteDance, which is backed by Sequoia Capital China, and payments processor Stripe, which counts Andreessen Horowitz as an investor.

More money chasing start-ups means higher valuations. The result is likely to be a greater concentration of private fundraising by the small group of VCs who are able to keep up.

Lex recommends the FT’s Due Diligence newsletter, a curated briefing on the world of mergers and acquisitions. Click here to sign up



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