What happened

Shares of Coupang (CPNG 0.35%) got crushed on Thursday, cratering as much as 21.5%. As of 2:23 p.m., the stock was still down 19%.

The major market indexes were already under pressure, with the S&P 500 and the Nasdaq Composite slumping 0.6% and 1.1%, respectively. The catalyst that sent the South Korean e-commerce platform plunging even further was a rumor that the company will be issuing additional shares. However, even if the rumor turns out to be true, the sell-off is wildly overdone.

So what

Rumors emerged early in the day that Coupang would be selling millions of additional shares, according to a report by The Fly. The story cited Bloomberg's Divya Balji reporting that Coupang had enlisted the aid of investment bank Goldman Sachs to sell a block of 50 million shares, though the story was unclear as to whether these were newly issued shares or a sale by an insider or early investor. 

A person looking excitedly at a smartphone with multiple electronic devices open on a desk with boxes ready for shipping.

Image source: Getty Images.

Let's assume for a moment the rumors are true. In its annual report issued earlier this month, Coupang disclosed that it had about 1.58 billion Class A shares outstanding, and roughly 175 million Class B shares outstanding. The only difference between the share classes is voting rights, so in all, Coupang has roughly 1.75 billion shares outstanding. 

Even if a secondary stock sale were to result in the release of 50 million new shares, the total dilution would amount to less than 3% -- hardly worthy of a 20% decline in the share price. 

Now what

Furthermore, if an insider or early investor were to divest a portion of their Coupang holdings, it's hardly cause for alarm. There were recently seven investors that held positions of more than 50 million shares, with some position sizes as high as 568 million shares. There are lots of reasons to sell shares and given the time of year, it's conceivable that tax planning may come into play -- that is if the rumors are true at all.

That said, given the specific details provided, and that this is an unconfirmed report, there's nothing much to see here, folks. Move along.