Sea’s Cofounders Lose $1.7 Billion Overnight As Tech Giant’s Earnings Disappoint

Singapore-based Sea Ltd. disappointed investors with first-quarter earnings that came in well below analysts’ expectations, sending its NYSE-listed shares tumbling 18% overnight, which wiped out a collective $1.7 billion from its three cofounders’ fortunes.

The digital gaming and e-commerce firm said Tuesday that its net profit for the quarter ended March 31 was just over $87 million, compared to a net loss of $580 million from a year earlier. Sea’s bottom line was hit hard by a $118 million goodwill impairment charge that pushed it well below the consensus analyst estimate of $224 million, as compiled by Bloomberg.

Forrest Li, Sea’s chairman and group CEO, stressed the fact that his tech firm is trying to do more with fewer resources to improve profitability. “As we continue to fine tune our operations and navigate near-term macro uncertainties, we remain highly confident in the long-term opportunities in our markets and our ability to capture those profitably,” he said in a statement.

Sea said its revenue for the first quarter was $3 billion, marking a 5% year-on-year increase, its slowest pace of growth over the past three years. The company’s lacklustre result highlighted uneven performances across its units.

E-commerce revenue for the period rose 36% year-on-year to $2.1 billion, while its digital financial services saw its top line rise 75% to $412.8 million. Revenue at its digital entertainment unit, once its biggest revenue contributor, however, fell 43% to $540 million, as it faces headwinds including India’s ban of its flagship mobile game Free Fire.

In an overnight report, Singapore-based CGS CIMB research analyst Ong Khang Chuen noted that while its online gaming unit Garena still faces challenges, “we see green shoots with positive user trends for Free Fire” in April and new game launches expected in the first half of this year.

“With [Sea] now a profitable company with strong cashflow generation and balance sheet, we believe it is on strong footing to capture longer-term tailwinds from ASEAN digitalization,” he added.

In March, Sea posted its first-ever quarterly profit for the three months ended December 31, following a period of belt-tightening measures that included cutting thousands of jobs. To rein in costs, Sea also downsized its global ambition for Shopee, its e-commerce unit that competes with Alibaba’s Lazada and superapp Grab. Last year, Shopee exited France, Spain and India—just months after pilot launches in those markets.

Li cofounded Tencent-backed Sea with group COO Gang Ye and Shopee’s Chief Product Officer David Chen in 2009, the year the trio first launched online gaming platform Garena, with the backing of angel investors like the late Skype cofounder Toivo Annus. Six years later, Sea launched Shopee in Singapore and it has since expanded globally.

The company’s fintech unit has also been making some headway with its digital payments and services. In September 2021, SeaMoney rolled out its digital bank in Indonesia. It has also clinched digital bank licenses in Malaysia and Singapore.

The company’s stock fell 18% in New York overnight and closed at $72.50 a share. The slump slashed Li’s net worth by $1 billion to $4.6 billion, while Ye’s wealth fell by $552 million to $3 billion, according to Forbes Real-Time Billionaires List. Meanwhile, Chen’s fortune fell $177 million to $800 million.

Sea’s shares have gained about 37% this year, which is still well below the stock’s all-time high of $357.8 reached in 2021, when pandemic lockdowns boosted online gaming and shopping.

Li was ranked No. 11 on the list of Singapore’s 50 Richest that was published in September, with a net worth of $4.2 billion at the time.