Singapore's Sea Falls Below IPO Price in Rocky Public Debut

(Bloomberg) -- Sea Ltd. shares fell for the third day in a row and dropped below their initial public offering price, a rocky start as a public company for the Singapore games startup.

Sea’s stock slipped 9.9 percent in New York trading Wednesday to close at $13.73. The company sold shares to investors at $15 and they rose 8.4 percent in its first day of trading last week.

Investors may be skittish about Sea’s outlook given heavy losses as Chief Executive Officer Forrest Li expands beyond games into e-commerce and payments. The company’s underwriters also pushed hard to raise $884 million, increasing the number of shares sold and lifting the price from an initial range of $12 to $14.

“By pricing above the range and upsizing the offer, they soaked up a lot of demand at the IPO,” said Matthew Kanterman, an analyst with Bloomberg Intelligence. “At this valuation, there’s high expectations for Sea to show the street it can grow into its valuation and drive profitability on top of its past investments.”

The company rose to a market capitalization of $5.2 billion last week, before dropping to $4.5 billion. That still means gains for early backers such as Tencent Holdings Ltd., the Ontario Teachers’ Pension Plan, Malaysia’s sovereign wealth fund and several Asian billionaires.

The Tencent of Southeast Asia Isn’t Really Like Tencent at All

Sea was founded by Li as an online gaming company in 2009 and originally named Garena. He rebranded the company to reflect its regional ambition and diversification. Sea branched out with a digital payments service called AirPay in 2014 and the mobile shopping business Shopee in 2015.

Sea’s games business, which retained the Garena name, still accounts for more than 90 percent of total revenue. Like Tencent, the company offers games for free, then collects money when players buy virtual items like armor, weapons or special skills. It makes money in e-commerce from commissions and advertising, while collecting fees from payments.

Sea has been viewed as something of a test case for startups from Southeast Asia, including ride-hailing provider Grab, e-commerce site Tokopedia and travel provider Traveloka. Goldman Sachs Group Inc., Morgan Stanley and Credit Suisse Group AG led the public offering.

To contact the reporter on this story: Yoolim Lee in Singapore at yoolim@bloomberg.net.

To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Robert Fenner

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