Billionaire Duo Behind Singapore’s Sea Lose $1.6 Billion In Biggest Share Price Drop After Earnings Miss

Two billionaire cofounders of Sea Ltd. saw their net worths tumble overnight after the Singapore-based tech giant reported disappointing second quarter earnings, and laid out plans to bolster e-commerce investments which could put the company back in the red.

Sea’s shares suffered their biggest daily drop since the company went public in 2017 on Tuesday, when they dived almost 29% on the New York Stock Exchange. The stock plunge erased roughly $1 billion of chairman and CEO Forrest Li’s fortunes, bringing his net worth to $2.5 billion on Forbes’ Real-Time Billionaires List. Meanwhile, chief operating officer Gang Ye lost around $565 million from the shares decline, leaving his net worth at $1.8 billion.

Sea said on Tuesday that its second quarter revenue recorded a 5.2% year-over-year increase to $3.1 billion, falling short of the $3.2 billion that analysts have estimated. Its e-commerce business Shopee, which contributes about two-thirds of the company’s top-line, posted its slowest growth rate at 20.6% to $2.1 billion. Revenue at its profit-making gaming unit, which helped fund Sea’s expansion in e-commerce and digital financial services, plummeted 41.2% to $529 million, while sales from digital financial services rose 53.4% to $423 million.

Sea said it collected a net profit of $331 million in the second quarter, compared to a loss of $931 million in the same period last year. The company, however, signaled that it may once again bleed red ink. “We have started, and will continue, to ramp up our investments in growing the e-commerce business across our markets,” Li said in an earnings call. “Such investments will have impact on our bottom-line and may result in losses for Shopee and our group as a whole in certain periods.”

Li’s remarks, which comes as Shopee is facing an increasingly fierce competition from rivals like Alibaba’s Lazada and ByteDance’s TikTok, marked a shift from the company’s focus on improving profitability. Sea reported its first-ever profit in the fourth quarter of 2022, following cost cutting measures that involved thousands of layoffs and freezing salaries.

“Although we agree it is the right approach to defend market share amid intensified competition, no clear direction of GMV (gross merchandise value) growth and management’s tolerance of turning back to loss-making suggest to us that there is a lack of visibility on the investment’s effectiveness and a brutal battle could be just starting,” wrote Alicia Yap, an analyst with Citigroup, in a research note.

Founded in 2009, Sea was once the world’s best performing stock during the height of the pandemic. The e-commerce and gaming giant, however, has struggled to continue the momentum as the pandemic boom faded and investors turned cautious amid interest rate spikes. Sea’s market cap has fallen nearly 89% from its peak in October 2021. The decline has pushed David Chen, one of the three cofounders of Sea, off from the billionaire ranks.