Video gaming and e-commerce mogul sees wealth losses surpass US$10 billion after Tencent sells Sea shares

Sea founder Forrest Li has lost nearly US$11 billion since stock peaked in October, as losses accelerated after Tencent offloaded a sizeable stake
E-commerce platform Shopee and mobile game Free Fire turned Sea into Southeast Asia’s most valuable company, but competition has raised profitability concerns

E-commerce

Bloomberg

Published: 11:25am, 6 Jan 2022

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The man who once was Singapore’s richest person has had one of the world’s biggest wealth plunges.

Forrest Li, the chairman and chief executive officer of Sea Ltd, has lost almost US$11 billion of his fortune since the American depositary receipts of the company peaked on October 19, according to the Bloomberg Billionaires Index. After growing competition and a wider profit loss, the latest blow came on Tuesday, when Tencent Holdings Ltd cut its stake in the gaming and e-commerce giant, driving the stock to its worst slump in almost two years.

Li became Singapore’s richest person last year as the company benefited from a surge in demand for gaming and online shopping amid the Covid-19 pandemic. But things soon started turning sour as Sea faced profitability concerns amid fierce competition and rivals’ public debuts.

Tencent divests mature tech stocks to focus on metaverse, new industries

Even before Tencent’s move, its ADRs had dropped 39 per cent from the high in October. They fell another 6.6 per cent on Wednesday to close at US$184.72 in New York.

Tencent said Tuesday it is cutting its Sea stake to 18.7 per cent from 21.3 per cent, with its voting rights decreasing to under 10 per cent. The move followed an earlier statement from Sea saying it is seeking to increase the voting power of its Class B shares and that Tencent would convert all such stock into Class A shares, resulting in Li becoming the beneficial owner of all outstanding Class B securities. The change, which is subject to a shareholders’ vote next month, would effectively increase Li’s voting power to about 57 per cent from 54 per cent.

Sea, based in Singapore and traded in the US, became Southeast Asia’s most valuable company thanks to the success of its e-commerce platform Shopee and mobile game Free Fire, which has surpassed 1 billion downloads on Google Play. Gang Ye and David Chen, who started the company with Li in 2009, have fortunes valued at about US$6 billion and US$2 billion, respectively.

Now Li is worth US$11 billion, with his wealth plunging by more than US$2 billion in the past two days alone. He’s Singapore’s third-richest person, following Li Xiting of medical-equipment maker Shenzhen Mindray Bio-Medical Electronics Co and Nippon Paint Holdings Co’s Goh Cheng Liang. Since Sea’s peak on October 19, only Colin Huang of e-commerce platform Pinduoduo Inc and Amancio Ortega, the founder of the Zara clothing brand, have lost more wealth than Li, according to the Bloomberg index.

A Sea representative declined to comment.

Sea’s valuation may keep getting affected until its profitability starts improving, according to Bloomberg Intelligence analyst Nathan Naidu. In November, the company raised its outlook for annual e-commerce sales to as much as US$5.2 billion from up to US$4.9 billion.

“Upfront investments for new geographical expansion and the heavy sales and marketing expenses to acquire new users in these new markets will keep weighing on earnings,” he said, adding that the company has plenty of growth opportunities and its prospects remain intact. “This, along with rising competition from rivals – particularly from the recently listed Grab and soon-to-be-public GoTo Group – in its home markets in Southeast Asia, and potential execution risks in unfamiliar markets – LatAm, Europe and India – may fuel investor concerns and drag Sea’s valuation.”