Tencent-backed SE Asia’s digital startup Sea raises $884m in US IPO

Sea
Sea leadership team (including Chairman & Chief Executive Officer Forrest Li and President Nick Nash) on the podium. Credit: NYSE

Singapore’s gaming and e-commerce company Sea Ltd has priced its shares above expectations at $15 a piece, raising about $884 million in an Initial Public Offer (IPO) on the New York Stock Exchange (NYSE).

Chinese internet giant Tencent-backed Sea, which set out to raise up to $1 billion via a US listing, saw strong demand for the shares that had earlier been priced between $12 to $14. The demand for shares may have been backed by investors’ fear of missing a chance to be part of Sea’s fortunes, a player that calls itself an “emerging growth company” and aims to be Southeast Asia’s version of Tencent.

At the listing, the offer size was also hiked from its earlier range to 58,960,000 shares, each share representing one Class A ordinary share “for a total offering size of approximately $884 million, assuming the underwriters do not exercise their option to purchase additional ADSs,” Sea said in a statement late evening on Friday.

The underwriters’ option or a greenshoe option, which has also been available as part of the IPO, could take the value of the offering to $1 billion, much wanted by Sea that is looking to grow its business, especially in the areas of user acquisition, content procurement and research and development in a region which it likes to call ‘Greater Southeast Asia’.

Sea has granted the underwriters a 30-day option to purchase up to an additional 8,844,000 ADSs to cover over-allotments. The ADSs are expected to begin trading on the New York Stock Exchange on October 20 under the ticker symbol “SE.”

Sea that started off as Garena — a gaming company — now has three key businesses that 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.

However, the company has not shied away from accepting its challenge with a “history of losses” although it claims to maintain a strong market position riding on the regions’ underlying fundamentals.

A 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.

Sea Group is looking to make inroads in the region’s crowded e-commerce and payments markets. Chinese e-commerce giants like Alibaba and even US-based Amazon are seeking to expand their footprint into Southeast Asia.

In the e-commerce space, Sea’s Shopee would have to compete with the likes of Alibaba-backed Lazada and many other smaller players who may be eating into the online shopping pie. Alibaba had recently led a $1.1-billion investment in Indonesia’s Tokopedia that has previously raised $100 million from Japan’s SoftBank and Sequoia. In June this year, Alibaba invested $1 billion in Lazada to raise its stake to 83 per cent.

Further, the e-commerce and payments space in the region is set to see intense activity with Chinese major JD.com looking to make Thailand its hub for Southeast Asia. It has already announced a $500 million joint venture with Thailand’s Central Group focused on e-commerce and financial technology.

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