Is Southeast Asia’s Sea in Trouble?

Two billionaire cofounders of Singapore-based Sea Ltd. saw their estimated net worth’s slump by $995 million overnight after the New York-listed internet giant swung to a loss in the third quarter of 2023 amid intensifying competition in the Southeast Asian e-commerce market.

The fall of Sea’s shares wiped out roughly $643 million off chairman and CEO Forrest Li’s fortune and bringing his net worth to $2.2 billion, according to Forbes’ real-time billionaire tracker. The share price drop also erased around $352 million from COO Gang Ye’s fortune, bringing his net worth to $1.7 billion. Li, Ye and former billionaire David Chen founded Sea in 2009. 

Source: https://en.wikipedia.org

Sea reported third-quarter revenue of $3.3 billion, a year-over-year increase of 4.9%, but posted a net loss of $144 million. This is returning to the red after three consecutive quarters of profits. Revenue from its e-commerce business Shopee, which contributes about two-thirds of the company’s top line, increased by 16.2% year-over-year to $2.2 billion, its slowest growth rate to date. The entrance of new players has intensified competition in our markets, said Forrest

Sea’s cash-cow gaming unit, which helped fund the company’s expansion in e-commerce and digital financial services, saw its revenue fall by 33.7% year-over-year to $592 million, while Sea’s nascent digital financial services arm saw its revenue rise by 36.5% year-over-year to $446 million.

Shopee has faced ongoing competition from rivals like Alibaba’s Lazada and ByteDance’s TikTok. An emerging opponent is Temu, the online marketplace arm of billionaire Colin Huang’s Chinese e-commerce giant PDD, which launched in the Philippines in August. 

Beyond deep-pocketed competitors Alibaba and ByteDance, local rivals such as GoTo Group are also piling the pressure on Sea. GoTo, owner of Indonesian e-commerce contender Tokopedia, almost doubled its net revenue during the June quarter.

Bloomberg Intelligence noted that Sea’s marketing costs surged 12.4 per cent year on year in the third quarter, after declining for a fourth consecutive quarter in the second quarter of 2023.

E-commerce across Southeast Asia is set to reach $139 billion in gross merchandise value (GMV) in 2023, up 6% from 2022, according to a report jointly prepared by Google, Temasek and Bain. With GMV expected to increase by 16% to reach $186 billion by 2025, the report said market leaders “have expressed willingness to begin re-investing profits to defend their market share,” as new entrants “have grown rapidly, gaining market share at an incredible rate”.

At one point in 2021, Sea was the world’s best-performing stock during the height of the Covid-19 pandemic. That year, Sea expanded its fintech ventures through its payments division SeaMoney, including launching a digital bank in Indonesia. In the pandemic’s aftermath and hiking interest rates, Sea’s market cap has fallen nearly 90% from its all-time high.

So, is Sea in trouble? No, it is of concern but Forrest Li is an adept entrepreneur who can work this through and come-out stronger and better!

References:

Southeast Asia’s Sea Swings To Loss Amid Intense E-Commerce Competition, Billionaire Cofounders See Wealth Drop $995 Million,  Catherine Wang, Forbes, 15 November 2023

Shopee-owner Sea shares plunge after company posts surprise loss of $202.8 million, The Straits Times, 15 November 2023