Singapore seas plunged 14% after a bigger-than-expected loss

(Bloomberg) — Sea Ltd. reported a bigger-than-expected loss and withdrew its e-commerce forecast for 2022, joining other online giants struggling to gauge an increasingly uncertain global economic outlook.

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Its shares fell 14% in New York, wiping $800 million off founder Forrest Lee’s fortune. Once Southeast Asia’s most valuable company, Sea’s shares are now down almost 80% since their peak in October.

It was a sharp decline for one of Singapore’s best-known tycoons, whose fortune has dropped almost $17 billion from its peak. Li’s net worth of $5.1 billion now makes him the fourth richest in the city-state, according to the Bloomberg Billionaires Index.

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The unfavorable result came after Sea cut its May e-commerce revenue forecast to a minimum of $8.5 billion from $8.9 billion previously. Shoppers emerging from pandemic lockdowns are cutting back on online purchases, shifting to essential goods during a potential recession.

The suspension of e-commerce revenue guidance “will no doubt cause concern in investor sentiment,” said Alicia Yap, an analyst at Citigroup Inc.

Sea, which considers Tencent Holdings Ltd. for its biggest investor, has suffered a number of setbacks this year, including a sudden ban on its most popular mobile game in India and the subsequent shutdown of its e-commerce operations there.

The company is trying to increase profitability as growth levels plateau. Second-quarter sales rose 29% to $2.9 billion, the slowest growth in nearly five years.

Key insights

  • Sea reported an adjusted loss before interest, taxes, depreciation and amortization of $506.3 million in the June quarter, beating the average forecast of $482.3 million. Its net loss doubled to over $931 million.

  • In Southeast Asia and Taiwan, adjusted Ebitda loss per order for Shopee – before the allocation of overhead costs – was less than 1 cent. Chief executive Forrest Li confirmed a target for the business to reach positive adjusted Ebitda before the Asia headquarters costs this year

  • Second-quarter revenue from Shopee, Sea’s e-commerce unit, rose 51 percent to about $1.7 billion, compared with estimates of $1.9 billion.

  • Revenue from games division Garena fell to $900.3 million, slightly above estimates of $827.6 million, as hit mobile game Free Fire matures. The company said in March that it expects Garena to report $2.9 billion to $3.1 billion in bookings in 2022, which would be its first decline ever.

  • Revenue from SeaMoney, Sea’s digital financial services unit, rose to $279 million.

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  • Sea is reducing its overseas footprint and cutting jobs in peripheral businesses as competition takes its toll and as it focuses more on profitability, a sharp shift from its previous position of spending on global expansion.

  • Shopee’s gross merchandise value, the sum of transactions flowing through its platform, rose 27% to $19 billion.

  • Some investors are reducing their exposure to Sea. Tiger Global Management LLC sold $473.8 million in shares of Sea, trimming its holdings after six quarters of buying, according to an SEC filing. Altimeter Capital Management LP, a shareholder in Singapore-based Grab Holdings Ltd., has exited Sea’s Class A-ADRs, according to a Bloomberg News analysis of its filings.

(Updates with the founder’s loss of wealth from the second paragraph)

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