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
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.
“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.
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.
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.”
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.