Class Action Lawsuit Intensifies Coupang's Regulatory and Legal Overhang

What happened

The Portnoy Law Firm announced a class action lawsuit on behalf of Coupang investors who bought securities between August 6, 2025, and December 16, 2025, citing alleged securities fraud during that period. This legal action stems directly from Coupang's massive 2025 data breach, which exposed nearly 34 million customer accounts and has already triggered regulatory investigations and a KRW 1.685 trillion voucher program. The lawsuit likely targets the company's disclosures or lack thereof regarding the breach's impact, adding a new layer of financial risk beyond the existing regulatory fines and remediation costs. Despite Coupang's efforts to portray the breach as manageable in filings, the class action reveals deeper governance failures and potential shareholder losses that could undermine investor trust. This development exacerbates the already significant overhang on Coupang's stock, which trades at premium multiples while facing escalating legal and regulatory headwinds.

Implication

This lawsuit directly amplifies the regulatory and cybersecurity risks highlighted in the DeepValue report, introducing additional litigation costs and potential settlement payouts that could strain Coupang's liquidity. It underscores persistent governance weaknesses, eroding investor confidence and possibly increasing the cost of capital as risk premiums rise. Combined with the existing KRW 1.685 trillion voucher program and potential fines up to 3% of revenue, these legal expenses threaten to divert resources from growth initiatives like Developing Offerings. Investor sentiment may deteriorate further, exacerbating the stock's vulnerability given its high P/E of ~94x and EV/EBITDA of ~33x. Long-term, this could impair Coupang's ability to fund its capital-intensive logistics moat and expansion bets, reinforcing the downside scenario outlined in the report.

Thesis delta

The class action lawsuit does not fundamentally alter the DeepValue thesis, which already rates Coupang as a 'POTENTIAL SELL' due to regulatory fallout and premium valuation. However, it concretely validates the report's emphasis on legal and financial risks, adding urgency to monitoring for cumulative cash outflows from fines, vouchers, and now potential settlements. Investors should view this as reinforcing the bear case, where escalating liabilities could trigger a downgrade to 'STRONG SELL' if total breach-related costs exceed thresholds like $1.5 billion by 2027.