Singapore’s Sea Tumbles as E-Commerce Shows Signs of Slowdown

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Sea Ltd., Southeast Asia’s most valuable company, tumbled after reporting third-quarter financial results that showed signs of a slowdown in e-commerce growth.

The Singapore-based company’s revenue doubled to $1.2 billion for the quarter and it boosted annual forecasts for two key businesses. But net losses also doubled to $419.9 million and quarter-on-quarter growth in e-commerce gross merchandise value dropped to 16%, from 29% in the second quarter.

Sea shares slid 4.3% in U.S. trading. The stock is still up more than 300% for the year.

”The results were disappointing,” said Nirgunan Tiruchelvam, head of consumer sector equity research at Tellimer. “This suggests that the market’s grand expectations of high growth in the e-commerce segment are misplaced.”

Singapore’s Sea Tumbles as E-Commerce Shows Signs of Slowdown

Sea has emerged as a stock-market sensation since its initial public offering in 2017, a wager the money-losing company can establish itself as a leader in e-commerce and gaming in Southeast Asia. Its shares have surged about 1,400% since the start of 2019, pushing its market value to more than $80 billion.

The rally has minted at least three billionaires at the company. Chief Executive Officer Forrest Li’s net worth is estimated at $9.4 billion, according to the Bloomberg Billionaries Index.

While reporting its financial results, Sea said that it now forecasts its digital entertainment business will surpass revenue of $3.1 billion, compared with an earlier estimate of as much as $2 billion. Its e-commerce business is now expected to exceed $2.3 billion, up from as much as $1.8 billion.

Singapore’s Sea Tumbles as E-Commerce Shows Signs of Slowdown

Key Insights

  • Revenue at Garena increased 73% to $569 million, reflecting sustained popularity of mobile battle royale game Free Fire.
  • Revenue from Shopee and other services climbed 113% to $489.5 million.
  • Sea’s total sales and marketing expenses in the third quarter increased 87% to $471 million.

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  • Starting with its earnings release for the third quarter, Sea is discontinuing reporting adjusted revenues and making other changes to its accounting methodology in response to Securities & Exchange Commission inquiries.
  • Since its initial public offering in New York in 2017, Sea had been encouraging investors and analysts to focus on financial metrics that are not in compliance with the generally accepted accounting principles, or GAAP.
  • Chief Corporate Officer Yanjun Wang said in August that for Garena, the company will provide another operating metric of “bookings,” which is GAAP revenue plus changes in deferred revenue.
  • Sea’s digital payments and financial services unit, SeaMoney, gained traffic in the third quarter as people spent more time and money online.
  • Its total payment volume for the quarter exceeded $2.1 billion, from $1.6 billion during the June quarter.

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