Coupang Faces Lawsuit Over Cybersecurity Failures and Disclosure Lapses

What happened

A shareholder litigation firm is investigating Coupang's officers and directors for alleged fiduciary breaches tied to a data breach and inadequate cybersecurity protocols. The lawsuit claims a former employee accessed sensitive customer data undetected for six months, exposing the company to heightened regulatory and legal risks, and that insiders failed to report this promptly as required. This development amplifies a key risk previously noted in Coupang's filings, where cybersecurity was listed among vulnerabilities, casting doubt on governance and risk management. Despite strong operational metrics in the Product Commerce segment, such as $705 million in Q3 2025 adjusted EBITDA and robust free cash flow, the incident threatens customer trust and could lead to financial penalties. The timing is critical as Coupang navigates full valuation, ongoing losses in Developing Offerings, and FX headwinds without a hedging program.

Implication

Investors should expect potential legal costs and fines that may erode the company's solid $1.27 billion TTM free cash flow, impacting capital allocation flexibility like the $1 billion buyback. Increased regulatory scrutiny in South Korea could heighten compliance burdens and operational disruptions, affecting growth in key segments. Customer churn is a real risk if trust erodes, potentially harming Active Customer metrics crucial for Product Commerce profitability. The allegations of disclosure failures undermine management credibility, possibly increasing the equity risk premium and valuation concerns already highlighted in the DeepValue report. While the core business remains strong, these issues exacerbate existing risks such as FX volatility and integration challenges, necessitating a reassessment of downside protection.

Thesis delta

The DeepValue report held a HOLD rating due to balanced risk/reward, with cybersecurity acknowledged as a risk but not as an immediate threat. This new information shifts the thesis by adding concrete, material risks of legal liabilities and governance failures that could directly impact financials and reputation. If proven, it could tilt the risk/reward toward SELL, but for now, it reinforces caution without overriding the core operational strengths, pending further developments.