Explainer: Why has Sea Limited's usually shy S'pore billionaire boss emailed staff over firm's share price dive?

SINGAPORE — Once a hot favourite for Wall Street investors looking to get into the technology scene in Southeast Asia, Singapore startup Sea Limited has suffered a US$150 billion (S$204 billion) plunge in its market value since late last year.

On Tuesday (March 15), the stock was trading just above US$89 a share in New York, down from a peak of about US$367 in November, and about US$210 this time last year. In early 2020, it was trading at about US$40 a share.

The precipitous loss of market value prompted the consumer internet company’s Singaporean billionaire boss Forrest Li to reassure his employees in a 900-word memo about the company’s position last week.

The Bloomberg news agency said in a report on Monday that the missive was sent company-wide on March 7, the first working day after Sea — the parent company of online games portal Garena and e-commerce platform Shopee — suffered its third-biggest single-day stock decline.

In it, the 44-year-old businessman, who is regarded by some people as being shy to the point of secretive, acknowledged that the drop was painful and that employees might be “feeling frustrated, disheartened or worried about Sea’s future”.

He then told them not to fear. “We are in a strong position internally and we are clear on our next steps. This is short-term pain that we have to endure to truly maximise our long-term potential.”

Despite a long period of stellar growth, November last year saw a disappointing quarterly report that prompted a bout of profit-taking, Bloomberg said.

The sell-off picked up pace in the subsequent months due to a confluence of events such as when Tencent Holdings, the firm’s biggest backer, announced that it was selling a part of its stake in January.

In February, India banned Garena’s lucrative gaming title, Free Fire, before it finally culminated in a horrendous quarterly earnings this month.

TODAY takes a brief look at Mr Li — a man who has largely shied away from the spotlight — what his letter means and what is next for his company.

THE FORREST AND THE SEA

Born in China, Mr Li came to Singapore as a student in 2006 and was reported by CNA to have been saddled with loans of S$100,000 and made only enough money to rent a room in the Braddell Road area here.

The naturalised Singapore citizen, who has a Master of Business Administration from Stanford Graduate School of Business in the United States, went on to set up Sea in 2009, originally as Garena. Sea later launched Shopee in 2015.

While Sea’s key markets in the Asia Pacific are China, Japan and South Korea, on top of emerging growth markets in Southeast Asia, Mr Li chose to list his company on the New York Stock Exchange in 2017 rather than the Singapore Exchange.

Dr David Kuo, co-founder of The Smart Investor financial education online site, said in a 2020 commentary for CNA that this was a strategy that worked well for the company.

At the time he penned the commentary, Dr Kuo said that Sea’s stock had soared more than 1,000 per cent since the beginning of 2018 and nearly 300 per cent in 2020 alone. This gave it a market value of S$92.7 billion then, making it the company that had gained the most market value in 2020 on the Nasdaq exchange.

Last year’s Bloomberg Billionaires Index showed that Mr Li was worth US$19.8 billion, which made him Singapore’s richest person at the time.

However, his wealth plunged to US$11 billion in January and he was relegated to become the third richest person in Singapore, Bloomberg reported.

AN UNUSUAL EMAIL

In a separate commentary last year, Dr Kuo described Mr Li as “somewhat of a mysterious figure unless you’re a gaming enthusiast or in the investing and startup community”.

Sea’s former public relations head Tan Siwei revealed in a public talk in 2017 that Mr Li “is very soft-spoken and very reserved. He is typically very media-shy and does not like to be in the limelight”.

This trait was mirrored in how Sea deals with publicity. Bloomberg said that the firm’s early tendency was to share as little as possible, when others in the industry often sought it out.

That is why Mr Li’s email was described by Bloomberg as “unusual” and that it underscored changes underway at the gaming and e-commerce giant.

In the past, Bloomberg said that Mr Li had addressed his employees mainly to celebrate key milestones.

However, the news agency added that fund managers had begun urging Sea to be more transparent about its strategy and numbers in recent months.

One hedge fund founder told Bloomberg that companies cannot “hide in a corner and not say anything” when times are bad but rather, must communicate and be more open with investors.

And it would appear that Mr Li has heeded that call. Bloomberg said that he made “unusually long and detailed remarks” during an earnings call this month.

During the call, Sea provided new and more specific data including its first annual guidance for financial-services arm SeaMoney and unit economics for online-shopping arm Shopee in Brazil, as well as for Southeast Asia and Taiwan.

Mr Kelvin Seetoh, the co-founder of Singapore-based investor group 10X Capital, told Bloomberg that the additional metrics disclosed by Sea could have been a result of its declining share prices.

Sea said in a statement to Bloomberg that it reflected growth and evolution of the business.

WHAT’S NEXT

Sea said in a press release on March 1 that although there are some headwinds affecting its digital entertainment business in the near term, the firm will continue to remain “extremely focused” on developing Garena’s global platform.

The press release, which was on the firm’s financial results for the fourth quarter and full year 2021, added that Sea views the platform as a “key strategic asset in the long run”.

Moreover, the company said it is clear that consumer activities and experiences are “increasingly converging online at the intersection of content, commerce and community”.

“We believe our ecosystem comprises a complete consumer tech and innovation stack that is distinctively relevant to the new opportunities being presented,” it added.

It will therefore continue to focus on best positioning itself in the long run to cater to the changing needs of “fast growing digital-native generations”.

Indeed, a Sunday article from the investment advisory firm Motley Fool observed that Sea’s stock continues to “provide a diverse cross-section of the digital economy that is difficult to get elsewhere from a single name”.