Coupang Faces Securities Fraud Class Action for May-December 2025 Period

What happened

A class action lawsuit has been filed against Coupang, alleging securities fraud from May 7 to December 16, 2025, during which the company reported strong Product Commerce performance with $705 million segment adjusted EBITDA in Q3 2025. However, the DeepValue report notes that Developing Offerings remained a significant drag, posting a $292 million segment adjusted EBITDA loss in the same quarter, alongside full valuation metrics like a P/E of 128 and FX translation risks without hedging. The lawsuit may center on potential misrepresentations or omissions regarding these financial challenges, such as the ongoing losses in newer ventures or undisclosed risks highlighted in filings, including integration issues with Farfetch. Despite solid free cash flow of $1.27 billion and a net-cash balance sheet, the legal action introduces uncertainty over past disclosures and could undermine investor confidence. Investors have until February 17, 2026, to seek lead plaintiff status, adding a legal overhang to the stock amidst already balanced risk/reward.

Implication

The class action raises immediate concerns about possible financial penalties or settlements, which could drain cash reserves and impact the $1 billion buyback program, reducing capital allocation flexibility. Long-term, it threatens to erode Coupang's reputation, potentially slowing customer growth and complicating partnerships, especially in Developing Offerings like Farfetch integration. Legal proceedings may force more transparent disclosures, revealing deeper issues in loss-making segments or FX management, aligning with the report's watch items on margin compression and integration setbacks. Investors must reassess the HOLD thesis, as increased regulatory scrutiny could amplify existing risks like competition and FX volatility, making the stock less attractive until clarity emerges. Monitoring the lawsuit's progress and any updates from Coupang on governance or financial restatements will be critical to adjusting investment strategies in light of heightened uncertainty.

Thesis delta

The HOLD thesis, based on balanced risk/reward from strong core performance but full valuation and Developing Offerings drag, now faces increased downside risk due to the securities fraud lawsuit. This legal overhang could pressure the stock further, potentially shifting the thesis toward SELL if the lawsuit uncovers material misrepresentations that impair financial credibility or growth prospects. Investors should watch for developments that might validate or mitigate these concerns, adjusting their stance accordingly.