Forrest Li of Singapore’s Sea Ltd loses nearly US$18 billion in tech stock wipeout

A tech sell-off, the shutdown of his company’s main e-commerce operation in India and disappointing earnings have all added to Li’s woes
He’s still rich – worth an estimated US$4.7 billion – but no longer enough to make the cut-off for the top 500 richest people on the planet

Singapore

Bloomberg

Published: 7:34pm, 17 May, 2022

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Just a few months ago, Forrest Li had a US$22 billion fortune and was the richest person in Singapore. Now he’s emerging as one of the biggest losers from a market crash that’s wiped more than $1 trillion from the net worth of the world’s 500 richest people this year.

It’s been a litany of unfortunate events for the Sea Ltd. founder: the tech sell-off, the shutdown of its main e-commerce operation in India and disappointing earnings have tanked the company’s American depository receipts more than 80 per cent from a peak in October. He’s still rich – worth US$4.7 billion, according to the Bloomberg Billionaires Index – but no longer enough to make the cut-off for the top 500 on the planet.

Traders are preparing for more bad news. The company, which is expected to report first-quarter earnings later Tuesday, is expected to post a record loss of more than US$740 million, according to the average analyst estimate compiled by Bloomberg. Sea’s net loss had already widened in the final three months of last year as the firm sped up its expansion.

A person walks in front of a sign for Shopee, the e-commerce arm of Sea Ltd, at its office in Singapore. Photo: Reuters

The downfall showcases the vulnerability of the quick wealth creation from the early stages of the Covid-19 pandemic – when tech giants benefited from greater demand for their services such as Sea’s e-commerce and gaming. Higher interest rates and the tensions surrounding the war in Ukraine are further hurting growth stocks.

“Sea is going to see increasing challenges in 2022,” said Shawn Yang, managing director at Blue Lotus Capital, an independent equity research firm in Hong Kong that cut the stock’s target price to US$105 from US$180 on May 10.

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The company’s e-commerce sales, its main source of revenue, could come short of its annual guidance of US$8.9 billion to US$9.1 billion as it faces intensifying competition from rivals and as consumers return to offline stores with the easing of Covid-19 restrictions, Yang said.

A Sea representative declined to comment for this story.

Beyond Li, many tech entrepreneurs who saw their wealth rise on the back of the pandemic-induced growth are being hit hard by the market sell-off. Eric Yuan, chief executive officer of Zoom Video Communications Inc., has lost US$4.4 billion of wealth this year, while the fortune of Amazon.com Inc.’s Jeff Bezos, the world’s second-richest person, is down almost US$58 billion. Ernie Garcia II and Ernie Garcia III, the father-son duo that runs used-car company Carvana Co., have shed US$15 billion combined.

Sea’s valuation collapse prompted the usually low-profile Li to reach out to his employees in March. In a 900-word internal memo, he told them not to fear and that while the drop is painful, “this is short-term pain that we have to endure to truly maximise our long-term potential.”

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Analysts generally remain optimistic about Sea’s future even though the stock fell to a two-year low earlier this month. Of the 38 analysts tracked by Bloomberg covering it, 34 recommend buying it. The company’s valuation may begin to rebound as prospects improve with its geographical expansion, according to Nathan Naidu, an analyst with Bloomberg Intelligence.

For now, though, the shares remain volatile. After a 32 per cent rebound amid a tech rally in the last two days of last week, they dropped 6.7 per cent on Monday. Gang Ye, one of the other company founders, has lost US$4.3 billion in wealth this year, while David Chen is no longer a billionaire.

“In the current economic environment, the level of anxiety about the effects of anticipated rate hikes by the Fed, along with rising inflation and impact from the Russian invasion of Ukraine just aren’t good for risky assets such as tech stocks,” Naidu said.