TLDRS;
- US judge dismisses $4.6B IPO fraud lawsuit against Coupang and its executives.
- Court finds no evidence of intent to mislead investors or make materially false statements.
- Institutional shareholders’ claims, including NYC pension funds, fail despite steep stock decline.
- All allegations against IPO underwriters also dismissed, case closed with prejudice.
Coupang, the South Korean e-commerce giant now headquartered in Seattle, secured a major legal victory this week after a U.S. federal judge dismissed a $4.6 billion securities fraud lawsuit tied to its 2021 initial public offering (IPO).
The suit, brought by a coalition of institutional investors including New York City pension funds, alleged that Coupang misled shareholders about working conditions, manipulated search algorithms, coerced suppliers, and encouraged employees to post favorable product reviews.
Judge Vernon Broderick of Manhattan concluded that the plaintiffs failed to demonstrate that Coupang or its executives intended to defraud investors or issued materially misleading statements. The court described many of the company’s public statements as “broad” and “aspirational,” noting they did not meet the strict legal requirements for actionable fraud.
Stock Reaction Shows Resilience
Despite facing a dramatic 50% decline in its stock price within a year following its IPO, Coupang shares remained relatively steady after the ruling.
Over the past five trading days, CPNG has surged approximately 13%, signaling renewed investor confidence in the company’s long-term prospects. At market close on September 10, shares were trading at $32.12, down 0.65% for the day, with a modest pre-market dip to $32.09.
Market analysts note that while the stock had suffered from regulatory scrutiny and operational criticism, the dismissal of the lawsuit removes a significant overhang on the company’s valuation.
High Standards for Securities Fraud
This case underscores how challenging it is for investors to prove securities fraud in the U.S., even when stock performance declines sharply and operational issues attract media attention.
The court emphasized that claims of unsafe working conditions or supplier pressure did not constitute material misrepresentation under U.S. securities law. Plaintiffs must prove not only false statements, but also specific intent to deceive, a high bar that was not met in this case.
Furthermore, the dismissal “with prejudice” means the plaintiffs cannot refile the case, offering a rare degree of finality in securities litigation. All claims against IPO underwriters, including Goldman Sachs, JP Morgan Chase, and Allen & Co., were likewise dismissed.
Implications for Foreign IPOs
Coupang’s IPO, which raised $4.6 billion, was one of the largest ever for a foreign company in the U.S., second only to Alibaba’s 2014 offering.
The case reflects a broader trend where high-profile foreign IPOs attract intense post-offering litigation, often driven by institutional investors. While lawsuits may cite operational or reputational issues, courts require detailed evidence of intentional deception to hold companies or underwriters accountable.
The outcome may provide reassurance to investors and underwriters involved in future foreign IPOs, demonstrating that stock volatility and regulatory scrutiny alone are insufficient grounds for successful fraud claims.
