Sea Group scales down US IPO size to $800m in updated SEC filing

A trader works on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York December 17, 2015. REUTERS/Lucas Jackson

Singapore’s Sea Group — formerly Garena — which is making its debut on the New York Stock Exchange (NYSE) is scaled down its public offering size to $800 million, down by almost $200 million, at a price ranging from $12 to $14, the internet company has said in an updated SEC filing last week.

The amount to be raised via the IPO is reduced by almost $200 million — if the company offers shares at the upper limit of the price band of $14 —  as compared to the much reported figure of $1 billion that Sea Group had been looking to raise.

“Sea Limited is offering 49,690,000 ADSs (American Depository Shares) to be sold in the offering. It is currently estimated that the initial public offering price per ADS will be between $12.00 and $14.00” Sea said in its amended filing on October 6.

With the offered shares, a share sale at the higher band of $14 will mop up close to $700 million while at $12 it could be around $600 million. Proposed maximum aggregate offer price, based on the filing, is at $800,009,000.

Moreover, being an “emerging growth company” as defined under applicable U S securities laws and, Sea is eligible for reduced public company reporting requirements.

The proceeds from the listing will be used by the company for growing its business, including user acquisition, content procurement and research and development while the remainder will be deployed for working capital and other general corporate purposes.

The firm’s key businesses include digital entertainment (Garena), e-commerce (Shopee) and digital financial services (AirPay). It is  looking to grow and monetize its user base and develop the fintech platform.

In its SEC filing earlier too, the company had mentioned its challenge with a “history of losses”. However, Sea believes that it maintains a strong market position, with the regions’ underlying fundamentals being drivers for future growth.

The company also disclosed that significant portion of its revenue is generated from online games while e-commerce and online financial services businesses were in their early stages of monetization and currently do not generate significant revenue.

“In 2014, 2015, 2016 and for the six months ended June 30, 2017, our digital entertainment business contributed 96.5%, 96.5%, 94.9% and 91.6%, of our total revenue, respectively. Among our online games, we are substantially dependent on a small number of games. Our top five games contributed 88.0%, 85.6%, 75.6% and 77.3% of our digital entertainment revenue during 2014, 2015, 2016 and the first half of 2017, respectively,” it said.

However, the company is hopeful that its revenue sources would diversify as each of its three businesses continue to grow. “As we further monetize our e-commerce business and expand our digital financial services business, we expect the revenue generated from those businesses will make us less dependent on revenue from our digital entertainment business.”

Sea’s IPO has come at a time when Chinese technology majors are seeking to expand their footprint into Southeast Asia, with a major focus on Indonesia, the regions’ largest economy by population and GDP. The company will have to compete with Grab, Go-Jek and Ant Financial in the payments space along with the e-commerce players who have a presence in Southeast Asia

In e-commerce, Alibaba is emerging as the clear champion as it owns Southeast Asia’s leading e-commerce firm Lazada. It also invested $1.1 billion in Indonesia-based e-commerce platform Tokopedia.

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