The Southeast Asian gaming-to-online retail giant is in a tricky spot. In August, CEO Forrest Li declared that Sea (SE.N) would ramp up spending to fight off intense competition. On Tuesday, the company’s third-quarter results laid bare that aggressive strategy. Sales and marketing costs nearly doubled to $918 million from the previous quarter as the $20 bln group prioritised building up its e-commerce unit Shopee, which makes up 70% of its total revenue. The return to a quarterly loss after three straight profitable periods sent its New York-listed shares plunging 22%, the biggest decline since August.
While the Singapore-headquartered group had previously hinted that higher investments were required to defend its market share from e-commerce rivals including Alibaba-owned (9988.HK), Lazada and ByteDance’s TikTok in Southeast Asia’s hyper-competitive market, investors still seemed surprised by the red ink. Perhaps that’s because Sea had just reset its strategy over the past year. It had retreated from overseas markets, slashed marketing costs and shed thousands of jobs to claw its way to profitability.
Sea’s shares are 90% below their peak in late 2021 but the pain may not be over. Li on Tuesday stressed that the company would prioritise investments to increase its market share, encouraged by its cash pile of about $8 billion. Shareholders face choppy waters ahead. (By Anshuman Daga)
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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
