In 2017 it launched its IPO on the New York Stock Exchange, the first Southeast Asian tech firm to do so. After several years of increasingly high valuations, Sea Limited is facing turbulent times as it tries to achieve profitability despite unfavorable macroeconomic factors.
Southeast Asia’s leader in e-commerce and online gaming
Sea Limited’s two biggest business segments are digital entertainment and e-commerce through its companies, Garena and Shoppee, respectively. Garena is a developer and publisher of free online games. Its most popular, Free Fire, a battle royale third-person shooter mobile game, is among the leading apps in the Google Play store. Garena also organizes eSports tournaments, and its Free Fire tournaments rank among the most watched globally. In the 2022 Free Fire World Series, professional eSports players competed for a prize pool totaling two million U.S. dollars.Shopee, on the other hand, has established itself as the undisputed e-commerce leader in Southeast Asia. With operations in Southeast Asia, Latin America, and Europe, Shopee had more web visits worldwide than established brands like Taobao, Etsy, Walmart, and AliExpress. The company operates a hybrid C2C and B2C model and introduced an integrated payment system through ShopeePay for a seamless consumer experience.
Popularity does not equate to profitability
Despite Shopee’s success, the e-commerce and digital financial segments have been incurring losses for Sea Limited for several years, as the company favored growth over profitability in these sectors. Sea Limited had previously relied on the profits from digital entertainment to absorb these losses.However, this strategy has proved unsustainable, especially in the face of a challenging and unpredictable global economy. In February 2022, the Indian government banned Garena’s most popular game, Free Fire, due to its ties to the Chinese company Tencent. This effectively removed one of Garena’s largest consumer bases and led to a decline in revenue. Shopee has also shut down its operations in overseas markets in Europe, India, and much of Latin America, in a bid to focus on profitability over growth. On top of that, Sea Limited has also gone through a round of layoffs to cut costs further. Having already lost around 170 billion U.S. dollars in valuation, the company faces an uphill battle to turn the losses around.